SEP IRAs

SEP stands for "Simplified Employee Pension," and these plans allow for employer contributions only. They are the perfect account for self-employed individuals. As such, SEP plans allow much higher contribution amounts than most other retirement plans.

Contributions

• 25% of compensation or $40,000 per employee--whichever is less. The new compensation cap of $200,000.
• A minimum annual contribution is not required.
• The SEP may be used in conjunction with other types of retirement plans.
• You are 100% immediately vested.

Investments

• You can choose from a wide range of IRA investments, including mutual funds or stocks.
• Your investments grow tax-deferred.

Withdrawals

• Withdrawals made before age 70½ are subject to a 10% federal tax penalty.
• If you withdraw assets gradually, instead of as a lump sum, your balance will continue to grow tax-deferred.

Page 7 of 8: Putting Your Money to Work

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