Is a SEP Plan Right For Your Business

A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. A SEP is funded solely with employer contributions. Employees do not make contributions to their SEP-IRA retirement account. Any money that goes into a SEP automatically belongs to the employee. Thus, the employee has the right to take his SEP IRA account money with him whenever he stops working for the company.

Any size business can establish a SEP, but the SEP retirement plan is utilized mostly by the self-employed and the small business with few employees. The SEP IRA rules dictate that if the business contributes for one employee, (i.e., the owner), then the business must contribute proportionately for all of the employees. With few exceptions, anyone who works for the business must be included in the SEP. However, you can exclude from participating in the SEP plan anyone who:

? Has not worked for the company during three out of the last five years.

? Has not reached age 21 during the year for which contributions are made.

? Received less than $450 in compensation (subject to cost-of-living adjustments) during the year.

SEP IRA contributions to each employee for 2004 cannot exceed the lesser of $41,000 or 25% of pay for W2 recipients (20% of income for sole proprietors). The SEP IRA contribution limit goes up to $42,000 for 2005, and is subject to cost-of-living adjustments for later years. SEP-IRA rules do not provide for additional catch-up contributions for those 50 years old or over.

A growing number of self-employed individuals with no employees are abandoning the SEP-IRA for a newer type of retirement plan called the Solo 401(k) or Self-Employed 401(k). The two main reasons for the switch are 1) they can generally contribute much more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are allowed under a Solo 401(k), whereas loans are prohibited under a SEP-IRA.

Example: Henry, age 52, a realtor received $60,000 in compensation from self-employment income in 2004. For 2004, he could contribute a maximum of $27,152 in a Solo 401(k) versus a maximum of $11,152 under a SEP IRA.

However, the Solo 401(k) does not work for businesses with employees. Thus, if your company plans to hire employees or currently has a few employees, the SEP IRA may be your best choice as a retirement plan that is inexpensive and simple to operate.

Daniel Lamaute, CEO of Lamaute Capital, Inc. (http://www.InvestSafe.com) specializes in setting up retirement plans. You may visit http://www.investsafe.com to access a free calculator that will help you estimate what your maximum contribution might be under different plans.

---

The Benefits of Laddering Your CD Investments

If you've decided to stock some money away in a... Read More

Why have Investment Plans for the Stock Market

If you do not have an investment plan in the... Read More

Learn How to Lose and Risk Management

One of the leading traders on Chicago Mercantile Exchange, because... Read More

What Age Should I Start Saving For Retirement?

Ask this question to 100 people and you will receive... Read More

Buying a Home - Your BIGGEST Investment

This column has often focused on intangible investments like stocks... Read More

Porters Five Forces Analysis

If you've ever listened to Warren Buffett talk about investing,... Read More

The Biggest Oil Opportunity in the World ? And How You Can Profit From It

Where is the second biggest deposit of oil reserves in... Read More

Basic Options Terms

Options are good investing and speculative instruments. But options terminology... Read More

New U.S. Mint Coins a Golden Opportunity

In April, the U.S. Mint revealed plans to strike in... Read More

Buy: Hold: Sell: Jump

I'm sitting here at my computer desk with a cup... Read More

Retirement or Financial Freedom?

In the past most people never retired. They died. The... Read More

Gold; What Type of Gold to Buy

JewelryThe advantages are:? Gold Jewelry is the easiest of the... Read More

Investing 101: Risk Terminology - BETA

About thirty years ago, statisticians armed with all of their... Read More

Why You Need To Buy and Sell Gold Coins (Part 5)

Grading coinsThe condition of a coin is commonly summarized by... Read More

Begging Your Trust in Africa

The syntax is tortured, the grammar mutilated, but the message... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 1

Over 80% of all individual investors lose money in any... Read More

It Is Never Too Early To Start A Roth IRA!

The Roth is kind of weird until you get used... Read More

Investing As A Sport?

I said last week that money doesn't generally buy happiness,... Read More

Dont Catch a Falling Knife

One of the most common mistakes made by inexperienced investors... Read More

Chile Leads the Latin Pack

Everyone's talking about China. Don't miss the opportunities in the... Read More

Powerful Hidden Techniques Mystery Formula - The Covered Call Option Trading Buy-Write Strategy

For better or worse, most option trading investors purchase stocks... Read More

Annuity Help

Many people today are looking for annuity help. The biggest... Read More

Creating Wealth by Gearing Up

Gearing is where you borrow money to invest. As already... Read More

Find Your Investing Soulmate on the Jersey Turnpike

As a followup to a previous column, "Irreconcilable Differences," I... Read More

Value Investing

By definition, value investing is the process of selecting stocks... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

Investing and Asset Allocation

Sometimes you spend sleepless nights worrying about which stocks to... Read More

Before You Invest You Must Read This

It is important to answer the following questions before you... Read More

Economic Survival in the 21st Century - the Three Key Questions to Ask

In this "special report", I want to pose a few... Read More

Wit and Wisdom on Money, Wall Street and Success - Part #4

Can you concisely summarize your investment philosophy in a few... Read More

Ask The SEC

Who is the SEC and why should I ask them... Read More

Margin Benefits are Marginal at Best

Margin is one of those things that novices find puzzling... Read More

Your Worst Enemy To Successful Investing - The Media

How do you make your investment decisions and where do... Read More