The Self-Directed Simple Employee Pension Plan

Simple employee pension plans, or SEP IRAs, are geared towards individuals who are self-employed, partners, and owners of corporations. These plans provide a low-cost and simple retirement savings option for people in these positions. These plans offer higher contribution limits than a traditional or Roth IRA. Administration is less complicated than other account structures, and employers can easily make contributions to employees’ plans without incurring heavy expense in doing so. SEP IRAs can also be self-directed.

Man looks at his iphone while working on his macbookSelf-directed retirement accounts are popular for people who want to control their own retirement funds and investing decisions. Plan owners can choose their own assets to achieve diversified income growth for retirement.

Access to an asset class frequently referred to as alternative investments makes self-direction even more attractive for savvy investors. Instead of relying on the somewhat slow growth of returns that mutual funds and CDs offer, or weathering the typical Wall Street storms, self-directed account owners can invest in assets they know and understand.

Alternative Investments Include:

The self-directed simple employee pension plan (SEP IRA) owner enjoys these diverse investing vehicles, which can have the potential to garner greater returns in a shorter amount of time than traditional methods often present.

How Self-Directed SEP IRAs Work:

  • Employers and employees (if any) can contribute to individual, traditional IRAs owned by the employees, at institutions of their choice. (Please note: A self-employed individual is considered an employee as well as an employer, making contributions limits somewhat complicated. Seek appropriate counsel when determining contributions if you are self-employed.)
  • To fund the plan make annual contributions, rollover funds from an existing employer-sponsored plan, or transfer funds from another IRA.
  • All employees must receive the same benefits, which can be up to 25 percent of earned. Bonus: this percentage can change every year.
  • Employees are taxed at ordinary income tax rates when distributions are taken after they reach the age of 59 1/2.

Yearly contributions are not required. However, the fact that contribution limits to these plans are higher than the typical retirement account allows means plan owners can attain immediate capital in their plans to acquire desirable assets that build tax-sheltered retirement income.

For more information about self-directed simple employee pension plans (SEP IRAs), including contribution limits, contact Advanta IRA today.

This article was published on November 4, 2015, and has been updated for accuracy.

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About Scott Maurer

Scott Maurer, Vice President of Sales for Advanta IRA, is a recognized expert in the field of self-directed IRAs. With a law degree from the University of Florida and as a designated Certified IRA Services Professional (CISP), Scott’s keen understanding of rules and regulations fuels his passion to educate others on the power of investing in alternative assets using self-directed IRAs. Scott is a frequent guest on retirement and investing webinars and podcasts, and he has shown thousands of individuals how to achieve financial freedom by teaching them how to use their retirement funds to invest in private placements, real estate, private lending, and more. Throughout his two decades in the industry, he has watched numerous unique investments unfold, giving him great perspective of what is possible when people take control of their retirement funds and investing decisions.