If you're self-employed, and you've already established a SEP IRA retirement account, you've still got until April 15 to fully fund your plan for the 2008 tax year. If you haven't set up a SEP IRA, you might want to think about opening one - because it can help people like you build significant resources for retirement.
(If you don't have a SEP IRA yet, you can still establish and fund one for 2008, as long as you do so by your tax-filing deadline. This will likely be April 15, but your business could have a different deadline.)
A SEP IRA offers you some key advantages. First, of course, are the tax benefits. Your contributions are tax deductible and your earnings grow tax deferred, which means your earning can grow much faster than it would if placed in an account on which you paid taxes every year.
Furthermore, the SEP IRA's relatively high contribution limits allow you to put away sizable sums every year. You can put in the lesser of $46,000 for 2008 ($49,000 for 2009) or 25 percent of your compensation (eligible compensation is capped at $230,000 for 2008 or $245,000 for 2009).
Obviously, a SEP IRA can be a great vehicle for building your individual retirement savings. But if you own a small business, you may find that a SEP IRA is also a good tool for attracting and retaining good employees.
IRS regulations require you to include all eligible employees who are at least 21 and have been with your company for three out of the immediately preceding five years. But, once the plan is set up, you have a great deal of flexibility in making contributions to your employees' accounts. Consequently, you can change your annual contributions, or cut them altogether, according to the performance of your business. Keep in mind, though, that the percentage of compensation contributed to a SEP IRA must be the same for you and your employees. So, for example, if you put in 25 percent of your compensation to your SEP IRA, you must also contribute 25 percent of all eligible employees' compensation to their plans.
When you make company contributions, you may be able to deduct them as a business expense.
Your employees may be attracted to the SEP IRA for some of the same reasons you are: tax-deductible contributions tax-deferred growth and a wide range of investment options. You can set up a SEP IRA for your business with a minimum of paperwork. And you won't have to file a Form 5500, either.
Given all the benefits of a SEP IRA - tax advantages, high contribution limits, ease of administration - is it the right plan for you? It all depends on your individual situation. If you have employees, and you want to offer a retirement plan as a benefit, you'll want to give strong consideration to a SEP IRA. If you have no employees, you have other good options, one of which is an "owner-only 401(k).'' An owner-only 401(k) offers many of the same benefits of a SEP IRA, along with a loan feature.
Your tax adviser can help you determine which type of retirement plan is right for you. But whichever plan you choose, use it to its full potential. Retirement is expensive - so it pays to be prepared.
This article is prepared by Edward Jones for your local Edward Jones financial advisor.
ANNCR: If you're self-employed, and you have a SEP IRA, you still have until April 15 to contribute to your plan. If you don't already have a SEP IRA, consider opening one - it can offer you some key benefits.
To begin with, your contributions are tax deductible and your earnings grow tax deferred. And you can put in fairly large sums to your SEP IRA.
A SEP IRA also is a good tool for small businesses to attract and retain good employees. You'll help your employees build their retirement savings - and you have great flexibility in deciding how much to contribute to the plan each year.
Also, you may be able to deduct company contributions as a business expense.
Your tax adviser can help determine if a SEP IRA is the right retirement plan for you. Give it some thought today.
This is (NAME), your Edward Jones financial advisor.
Member, SIPC
Number of Words:
146
