A SEP IRA allows generous contributions limits. The 2020 SEP IRA contribution limit is $57,000 and the 2019 SEP IRA limit is $56,000.
Tax Deductible Contributions
Within IRS limits, contributions into a SEP IRA are generally 100% tax deductible.
Tax Deferred Growth
Interest earned in a SEP IRA grows tax-deferred. Dividends and investment earnings continue to grow without being taxed until you withdraw the assets. Withdrawals after age 59 ½ are taxed as ordinary income. Withdrawals prior to age 59 ½ may incur a 10% IRS penalty as well as income taxes. At age 70 ½ Mandatory Required Distributions are required.
Contributions into a SEP are completely discretionary. The percentage of contribution can vary year to year or can be stopped depending on profitability.
Low Cost and Easy Administration
SEP IRA accounts are inexpensive, easy to setup and maintain and do not require annual IRS filings.
Retirement Plan Consolidation
Retirement plans can be rolled over and consolidated into a SEP. This includes Traditional IRAs, 401k Plans, Money Purchase Plans, Profit Sharing Plans, Defined Benefit Plans, 403b Plans and Rollover IRAs. A Roth IRA or retirement accounts that have after tax contributions can not be rolled over into a SEP IRA.
SEP IRA Frequently Asked Questions
SEP IRA FAQs. Find answers to your questions about the SEP IRA.