What is a SEP IRA Account?

A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a type of retirement account designed for small business owners and self-employed individuals. It is similar to a Traditional IRA in that it allows contributions to be made on a tax-deferred basis, but it has higher contribution limits and more flexible rules for contributions.

With a SEP IRA, the business owner or self-employed individual can make contributions to their own account and to the accounts of their eligible employees. The maximum contribution that can be made to a SEP IRA is generally much higher than the limits for other types of IRAs, making it a good option for those who want to save more for retirement.

SEP IRAs are relatively easy to set up and maintain, and they do not have many of the administrative requirements that other types of employer-sponsored retirement plans have. However, it is important to note that SEP IRAs are employer-sponsored plans, so they may not be an option for individuals who do not have their own business or are not self-employed.

SEP IRAs can be a good choice for small business owners and self-employed individuals who want to save for retirement and who want the flexibility to make larger contributions. It is important to consider the contribution limits and other rules that apply to SEP IRAs when deciding whether they are the right choice for your retirement savings needs.

What is the Maximum Contribution That Can Be Made to a SEP IRA?

The maximum contribution that can be made to a SEP IRA depends on the amount of the individual's compensation and the contribution limits that apply for the year. For example, in the tax year 2022, the maximum contribution that can be made to a SEP IRA is the lesser of:

• 25% of the individual's compensation
• $58,000

It is important to carefully consider the contribution limits and other rules that apply to SEP IRAs when deciding how much to contribute to the account.