The Benefits of Starting an SEP IRA

Starting a SEP IRA can provide your business with a number of unique benefits. This type of retirement account has been growing in popularity as compared to other choices like the 401(k). Here are a few of the benefits that you can expect to realize by starting a SEP IRA.

Easier Process

When you compare the SEP IRA to other types of qualified retirement accounts, you will immediately notice that you are dealing with a much simpler process. Getting started with this type of account does not require the vast amounts of paperwork that are required when opening a 401(k) for your company. Therefore, this can save you a substantial amount of time when starting your retirement account.

The SEP IRA is also much easier to maintain over the life of the account as compared to a 401(k). It will require a relatively small portion of your time every year to maintain.

Lower Costs

Using a SEP IRA will also provide you with lower costs to deal with. When you are a business owner, you want to save in every way that you can. Therefore, choosing the retirement plan with the lowest costs can make a big difference overall. Both the setup and maintenance costs will be lower with this type of account. Brokers will typically charge more to maintain a 401(k) than they will an IRA. This type of account will also help your employees as the fees that are charged will use up less of their retirement dollars.

Save Money on Taxes

As an employer that offers the SEP IRA, you are entitled to make contributions to your employee's retirement accounts. While this might not sound very attractive at first, when you realize that you can deduct the entire contribution amount from your taxes, it becomes a little more appealing. You can contribute up to 25% of what your employees make in a given year to their accounts. As long as the amount does not exceed $49,000 per employee, you are free to contribute as much as you want. If you are getting close to the end of the year and you need to lower your tax liability, this can be a great way to do it.

Attract Employees

When you are a small business, sometimes it can be tough to attract top employees. You want to staff your company with the best employees that you can find, but going up against larger companies can be tough. By offering your employees a SEP IRA, this might be enough to entice them away from other companies. Many large companies offer a 401(k) that will only allow them to save up to $16,500 per year. With a SEP IRA, they can save substantially more without any penalties involved.

Create Loyalty

In addition to bringing in good employees, you will also be able to create loyalty among your workforce. By consistently contributing to their accounts, you will make them want to stay as long as they can. 

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