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The Power of... | a SEP IRA

The Power of... | a SEP IRA

September 14, 2023

Simplified Employee Pension (SEP) IRAs: A Great Retirement Savings Option for Small Business Owners

A Simplified Employee Pension (SEP) IRA is a retirement savings plan that allows small business owners to make tax-deductible contributions for themselves and their employees. SEP IRAs are a popular option for small businesses because they are easy to set up and administer and offer significant tax benefits.

Here are some of the benefits of SEP IRAs for small business owners:

  • Tax deductions: Contributions to a SEP IRA are tax-deductible for the business owner, which can reduce their taxable income.
  • Flexibility: SEP IRAs offer much flexibility regarding contribution amounts and eligibility requirements. Business owners can contribute up to 25% of each employee's compensation or up to the IRS contribution limit, whichever is less.
  • Portability: SEP IRAs are portable, meaning an employee can take their account with them if they leave the company.

A SEP IRA can be a great way to save for retirement if you are a small business owner. As you read above, SEP IRAs offer several benefits, including tax deductions, flexibility, and portability.

If you are considering SEP IRA(s) for yourself, your employees or both, here are some additional things to keep in mind about SEP IRAs:

  • Contribution limits: The maximum contribution to a SEP IRA for 2023 is $66,000. 
  • Eligibility requirements: Eligibility can be restricted to age 21, and you must have worked 3 out of the last five years, but they could be less restrictive. Such as age 18 and worked the previous three months
  • Administration: SEP IRAs can be administered by the business owner or by a financial institution. Suppose the business owner chooses to administer the plan themselves. In that case, they must know the IRS regulations governing SEP IRAs. *This is where Dixon Financial Group, LLC comes in. Our advisors have the necessary knowledge to implement SEP IRAs for your small business.

As a business owner, you will be confident that the Dixon Financial Group, LLC LPL Financial advisors have you, your company and your employees' best interest. After setting up the SEP IRAs for you and your employees, it does not stop there. We can work alongside all the SEP IRA participants during their retirement planning journey.

David S. Dixon, CFP®

Jacob S. Bierstedt, CFP®, ChFC

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