Retirement - Question 59

What is a SEP Retirement Plan? Does it require a lot of paperwork to open?

SEP stands for “Simplified Employee Pension Plan” (it is sometimes referred to as a SEP-IRA). A SEP is an employer-sponsored retirement savings program; the paperwork required to open one only consists of a one-page agreement.

SEPs are much less complicated to establish and maintain than traditional pension plans are, and they offer more benefits than a standard IRA. A standard IRA only allows annual tax-deductible contributions of up to $2,000, whereas a SEP permits contributions up to 15% of annual compensation (up to $22,500).

Contributions to a SEP are a tax-deductible expense. Even if you are in a one-man or one-woman business, you're eligible for a SEP.