Sep Ira: 6 Frequently Asked Questions Answered

Imagining your retirement years and knowing that you’ll have as much free time as you need to spend it with your family, engage in hobbies you have neglected, have some adventures you previously didn’t have time for, or simply enjoy a peaceful life, will certainly make you happy. What won’t make you happy, though, is the fact you’ll realize you may not have the money to finance those years, and being financially dependent on other people is not exactly a dream. Saving on time, however, will undeniably lead to the financial security you are after, and if you’re thinking that it may be too early for you to start saving, let me tell you right away that you’re wrong. It’s never too early, and here is why you should start now. 

Knowing that it’s time to start investing is one thing, but knowing how to actually do it is a completely different thing. And you, naturally, have to understand the latter if you really want to get the most out of your retirement investing process. Researching this topic, you’ll quickly come across numerous different accounts and options you can use, realizing that making the choice may not be as easy as you may have imagined. Understanding those different accounts and knowing exactly what each of them can do for you and for your retirement is a must, as that’s how you’ll make the perfect choice.

The different accounts all have different purposes, and researching them in details will result in realizing not only their similarities, but also their differences. The differences that make them either suitable or unsuitable for you. Researching all the accounts in details will take time, but it will also certainly be worth it, as you’ll get to understand precisely which account is best for you and how to, thus, create the perfect retirement plan. Today, we’re going to cover those SEP IRA accounts, helping you realize how they work, whether you should get them and what you can expect from them in terms of assets you can invest in.

What Is A SEP IRA?

Beginning with the basics, you first need to know what a SEP IRA is, so as to be able to proceed towards learning more about it. Not covering the basics and trying to go into the details right away could easily have you confused about all of this, which is not the goal. Understanding the fundamentals first, however, will create a good footing for you, allowing you to further build on the knowledge and realize precisely what this account is and whether it may be right for you. Not a new account, the SEP IRA is also not that uncommon and understanding its principles should be easy.

SEP IRA, a bunch of letters put together, do have their own, logical meaning. Coming across those letters for the first time, though, could certainly make you confused. Let’s, thus, explain what it all stands for. SEP, standing for Simplified Employee Pension, refers to plans that employers can set up for their employees, or that self-employed people can set up for themselves. IRA, standing for Individual Retirement Account, refers to those long-term savings accounts people can use to save for their future in a tax-deferred way.

Put together, here’s what these entail: 

So, a SEP IRA is, thus, actually a variation of the Individual Retirement Account, used by business owners to create retirement plans for their employees and for themselves, as well as by self-employed individuals and freelancers. Considered employer contributions, the SEP IRAs entail that the business will make the contributions on behalf of the employees, and the business could actually be you if you’re self-employed and earning money freelancing. These accounts are rather similar to traditional IRAs, but they do come with a few extra perks that make them quite appealing.

They can maximize savings through contribution limits, they reduce the tax bite thanks to deductible contributions, and the money contributed to the account will grow tax deferred. Furthermore, flexible funding, i.e. the possibility to decide on the amount you want to contribute each year, also makes these accounts rather interesting. Essentially, this is a win-win solution both for employers and for employees, and if you’re self-employed, it provides you with the perfect opportunity to create an amazing retirement plan and thus secure your financial future, without putting a huge strain on your budget in the present.

How Does It Work?

As the name says it, the plan is simplified, meaning it’s designed to make things rather easy, especially for those who own their own businesses and don’t hire any other people. Despite the simplicity, though, there are still some rules that have to be followed here, and those are similar to the traditional IRA rules you may already be used to. They allow for the same investment options as the traditional accounts and they are treated like those traditional accounts for tax purposes. Decisions on what to contribute and how much change every year, as explained above already, so this type of flexibility is also appealing to small businesses and self-employed people.

The minimum age for contributors is 21, and at least three years of employment is another requirement to consider. The individual employee account owners are the ones making the investment decisions, while an IRA trustee determines the eligible investments, deposits the contributions, sends annual statements, and makes sure that all the files needed by the IRS are properly filed. In any case, the rules are pretty much the same as with traditional IRAs and, as you can see at Investors Circle, the investment opportunities, i.e. the assets you can invest in are also the same.

Should You Get It?

Deciding whether to get this particular account is not going to be easy, especially since there are also others to consider, others that are offered and that all have their own advantages and disadvantaged. If, however, you’re a small business owner, or you’re self-employed, and you’re looking for a way to contribute to a tax-advantaged plan for your retirement, then the SEP IRA could be the perfect solution for you. You’ll get to contribute a nice sum every year and those savings will grow tax-deferred, or perhaps even tax-free. All in all, it seems to be a great investment plan, and it’s no wonder, thus, that it’s become so popular today.

Can You Add Gold To It?

Perhaps there’s one specific thing you’re wondering that can impact your decision on whether to get a SEP IRA or not. Simply put, you’re curious if adding gold to this account is an option, since you know that doing so is impossible with just any of the accounts you can set up for your retirement. Well, to cut right to the chase, this is certainly a possibility with the SEP IRA, meaning you can invest not only in gold, but also in other precious metals, including silver, platinum and more. If you’ve been planning to do that, you now know that it is a possibility, and that you can use this account to get the advantages of holding gold in your retirement plan.

Can You Do A 401k To SEP IRA Rollover?

In case you already have a different type of an account, such as a 401k for instance, then there’s most likely another thing preventing you from deciding to get this particular Individual Retirement Account. You don’t want to waste the money you’ve already put into your 401k, which is why you’re wondering if doing a rollover and transferring those funds to your SEP IRA is actually possible. Fortunately for you, this is another thing that you can certainly do, and the rollover rules are pretty much the same as those you would have to follow if you decided to do the transfer to your traditional IRA (additional info), meaning that it won’t be a difficult process.

How To Do It?

Understanding how to do the rollover, though, is extremely necessary before embarking on the actual journey, so getting your facts straight in advance is a must. Using relevant websites to help you figure out the process and, most importantly, working with the right gold IRA company – those are the crucial factors here. Once you find the best company, doing the rollover without facing penalties will be a piece of cake, so that’s precisely what you should focus on here, if you want to do everything correctly.