SEP IRA with NO Employees

SEP IRA contributions for a self employed individual with no employees

Contributions between 0% and 25% of compensation up to a maximum of $46,000 in 2008 can be made into a SEP. For incorporated businesses, compensation is based on W-2 income and there is a 25% maximum contribution. For sole proprietors compensation is based on adjusted earned income. Adjusted earned income is determined by completing an IRS worksheet. Contributions of up to 20% of adjusted gross income can be made to a SEP IRA. Annual compensation of more than $230,000 in 2008 cannot be taken into consideration for determining contributions.

SEP IRA Eligibility

Incorporated and unincorporated businesses. Sole proprietors, partnerships, LLCs, Subchapter S and C corporations qualify. Also, individuals with self employed income may be able to contribute to a SEP even if they contribute the maximum into a 401k or 403b retirement plan through their full time employer.

Self employed individuals should also consider an Individual 401k as an alternative to a SEP IRA. When compared to a SEP IRA, an Individual 401k may allow a greater contribution at the same income level due to the way the contribution is calculated.

SEP IRA versus Individual 401k: Which self employed retirement plan is better for you?

Compare the features of these retirement plans and determine which plan is more appropriate based on your situation SEP IRA vs Individual 401k.

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Disclosures:

* The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

* Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.