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SEP IRA (Simplified Employee Pension IRA) | Individual 401(k) | SIMPLE IRA | 401(k) Plans | Profit Sharing & Money Purchase Plans |
| Account Description |
Small business owners can make tax-deductible contributions with this flexible plan that is easy to set up and maintain.
If you have employees, you may be required to contribute for them as well. |
As a small business owner with no employees, you may be able to contribute more than other retirement plans. |
As an employer, you can offer a salary deferral plan for your employees easily and affordably. |
A flexible plan offering the highest level of employee pre-tax contributions, a wide range of employer contribution options, and an optional loan provision. |
Flexible plans with variable contribution options designed to reward long-term employees with tax-deferred growth - including an optional loan provision. |
| Eligibility to Contribute |
You can contribute at any age if you are self-employed or a small business owner. |
You can contribute at any age if you are self-employed, a spouse or a business partner. |
As an employer you can contribute for yourself and your employees at any age.
Works well for companies with 25 or fewer employees. |
As an employer you can contribute for yourself or your employees at any age.
Works well for companies with 25 or more employees who want to start a new plan or transfer an existing plan. |
As an employer you can contribute for yourself or your employees at any age.
Companies of any size can offer this plan. |
| Maximum Annual Contribution |
2006 tax year: As a small business owner you can contribute up to 25% of your compensation or $44,000 - whichever is less.
2007 tax year: As a small business owner, you can contribute up to 25% of your compensation or $45,000 – which ever is less
If you have employees, you may be required to contribute for them as well. |
May use a combination of salary deferral and profit sharing contributions. 2007 tax year:
- Profit Sharing: Up to 25% of compensation or $45,000
- Salary deferral: Up to 100% of compensation or $15,500 ($20,500 if over age 50)
- Combination may not exceed $45,000 or ($50,000 age 50 and older).
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Employer (Required): Either dollar-for-dollar matching up to 3% of compensation, or 2% of compensation to all eligible employees.
For tax year 2007
Employee: up to 100% of compensation or $10,500 ($13,000 age 50 and older). |
Employer: Profit sharing and match: For tax year 2007: Up to 25% of compensation or $45,000 including employee contributions.
Employee: Up to 100% of compensation or $15,500 ($20,500 age 50 and older).
Combination may not exceed $45,000 or if age 50 and older, $50,000. |
Employer: Up to 25% of compensation or $44,000 in 2006/$45,000 in 2007.
Profit sharing plans allow you to vary the contribution rate each year.
A money purchase plan has a fixed contribution requirement that your business chooses when your plan is started. This contribution is required each year. |
| Tax-Deductible Contributions |
As a small business owner you can deduct your contributions for yourself and your employees from your company's federal taxable income. |
As a small business owner you can deduct your contributions for yourself and your partner from your company's federal taxable income.
Business owners may choose to allow a Roth 401(k) salary deferrals within their plan. |
Employers can deduct contributions from federal taxable income.
Employees can make pre-tax contributions. |
Employers can deduct contributions from federal taxable income.
Employees can make pre-tax contributions.
Employers may choose to allow Roth 401(k) salary deferrals within their plan. |
Employers can deduct contributions from federal taxable income. |
| Types of Investments |
Stocks, bonds and mutual funds available through any qualified Investment firm with IRAs.
Savings accounts and CDs (Time Accounts) available through any qualified Investment firm (should be FDIC-insured IRAs) |
Thousands of mutual funds from many well-known fund families available through any qualified Investment firm. |
Stocks, bonds and mutual funds available through any qualified Investment firm who offer SIMPLE IRA's |
Mutual funds from many well known fund families. |
Stocks, bonds and mutual funds available through any firm who offers investment Profit Sharing or Money Purchase Plans. |
| Withdrawal Penalties |
10% IRS early withdrawal penalty if withdrawn before age 59 1/2 unless exception applies. See SEP details |
10% IRS early withdrawal penalty if withdrawn before age 59 1/2 unless exception applies. See Individual 401(k) details |
25% IRS early withdrawal penalty during the first two years of the account. 10% thereafter if withdrawn before age 59 1/2 unless exception applies. See SIMPLE details |
10% IRS early withdrawal penalty if withdrawn before age
59 1/2 unless exception applies. See 401(k) Plan details |
10% IRS early withdrawal penalty if withdrawn before age
59 1/2unless exception applies. See Profit Sharing details |
| Required Withdrawals |
Must begin at age 70 1/2 |
Must begin at age 70 1/2 |
Must begin at age 70 1/2 |
Must begin at age 70 1/2 |
Must begin at age 70 1/2 |
| See Details |
SEP IRA (Simplified Employee Pension IRA) |
Individual 401(k) |
SIMPLE IRA |
401(k) Plan |
Profit Sharing & Money Purchase Plans |
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