| 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.
A Simplified Employee Pension (SEP) plan may
work well if you want a low-cost,
easy-to-maintain retirement plan for you and
your employees. Both SEP IRA and Traditional
IRA contributions can be made to the same
account, and you have the flexibility to
change how much your business contributes
from year to year. |
| Eligibility to
Contribute |
You can contribute at any age if
you are self-employed or a small business
owner. |
| 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 whichever is less.
If you have employees, you may be required
to contribute for them as well. |
| 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. |
| Taxation of Earnings and
Withdrawals |
Tax-deductible contributions and
earnings are taxed as ordinary income when
withdrawn. |
| Types of Investments
|
- Stocks, bonds and mutual funds
available through any investment
firms brokerage IRAs
- Savings accounts and CDs (Time
Accounts) available through any
financial institution FDIC-insured IRAs
|
| Minimum Initial
Investment |
Varies by account from $0 to
$100,000 |
| Withdrawal Penalties
|
10% IRS early withdrawal penalty
if withdrawn before age 59 1/2 unless an
exception applies.
Exceptions:
- Death
- Disability
- Medical expenses in excess of 7.5%
of AGI
- Health insurance premiums if
unemployed for 12 consecutive weeks
- Qualifying higher education expenses
- Qualifying first time home purchase
($10,000 lifetime limit)
- Substantially equal payments made
over life expectancy
|
| Required Withdrawals
|
Must begin at age 70 1/2 |
| Deadline to Set Up and
Fund |
You may establish and fund up
through the business' tax filing due date
plus extensions. |
| Commissions and Fees
|
Varies by investment account |
