SEPs: Simplified Employee Pensions
SEPs or SEP-IRAs are generic retirement plans that allow investors to contribute and deduct up to 13.04% of self-employment income (15% if you are an employee of your own corporation). Currently the maximum annual contribution is $24,000. However the percentage varies each year, and lower amounts (or nothing at all) can be contributed when the investor is short of cash.
SEPs can be opened as late as the extended due date of the investor’s income tax return and are much simpler to establish and administer than Keogh profit sharing and pension plans. A bank or an insurance company will usually set up an SEP at no charge. No annual government reports are necessary and there are no ongoing administrative expenses associated with this form of IRA. SEPs are just as deductible as traditional IRAs but they allow bigger contributions.
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