When Is an SEP Retirement Plan the Smartest Option?

The SEP (simplified employee pension) retirement plan is a unique option that you have when planning for retirement. Sometimes, it makes more sense to open this type of account than it does to open any other type of retirement account. Here are a few things to consider about when an SEP retirement account makes the most sense.

When You Want Simplicity

One of the major benefits of this type of retirement plan is that it does not come with the complications that are present with other retirement plans. You will not have the massive amounts of paperwork that come with setting up a 401(k) or other similar retirement plan. You will also not have as many fees to worry about during the set up or maintenance process.

When You Want to Make Large Contributions

Another time that utilizing an SEP retirement plan makes a lot of sense is when you want to make large contributions to your retirement account. With this type of retirement plan, you can contribute up to 25 percent of your salary to the plan. You can contribute as much as $49,000 in one year with this type of plan. By comparison, you can put only $16,500 into a 401(k) retirement account.

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