A commonly used retirement vehicle for small business owners and self-employed individuals is the simplified employee pension plan, also referred to as SEP. As the name implies, this is a low-hassle way to gain a tax advantage while contributing to their future.
Compared with complex plans, SEPs offer at least four more advantages to making personal investments towards retiring comfortably.
Reduce Tax Obligations
Most people want to avoid paying too much in taxes. Typically, contributions to a SEP are tax-deductible, up to the maximum amount in the current tax year. Some plans are even allowed a startup credit where applicable.
Flexible Contributions
Your income may look different at the beginning of the year from what you earn later. Likewise, your small business sales may decrease. With a simplified employee pension plan, you can change the amounts of contributions accordingly.
Tax-Deferred Compounding
Having a SEP in your retirement portfolio allows you to take advantage of tax-deferred compounding. You can watch your money, including dividends and capital gains, grow without having a tax bill.
Win-Win Retirement Opportunity
As a small business employer, you can gain respect from employees by helping them reach their retirement goals. This shows them that you want them to be comfortably prepared for retirement.
Plan Today to Retire Tomorrow
Enhancing your benefits package with a simplified employee pension plan helps both you and your employees save for retirement. This is an ideal specialized account for small businesses and self-employed individuals.
Contributions are made without owing taxes until the money is distributed and you are on a path for a prosperous future.
