sep iras
Post on 03-Jan-2016
30 Views
Preview:
DESCRIPTION
TRANSCRIPT
1
SEP IRAs
2
PLEASE DO NOW…
In your notebooks, please answer
the following questions:
1.Compute: $120,000 x 25%
2.How does a self-employed
individual save for retirement?
3
TODAY’S GOALS
• What is an SEP plan?
• Why establish an SEP plan?
• How do we contribute to an SEP plan?
• SEP distributions.
4
INVESTMENT MANAGEMENT STANDARD(S)
Achievement Standard: Evaluate savings and investment options to meet short and long-term goals.
Achievement Standard: Evaluate services provided by financial deposit institutions to transfer funds.
5
DEFINITIONS TO KNOW
SEP (Simplified Employee Pension)
Rollover
6
WHAT IS A SEP PLAN?
A retirement plan established by employers, including self-employed individuals, partnerships, & sole proprietorships.
IRA-based plan to which employers make tax-deductible contributions on behalf of employees.
7
WHY ESTABLISH A SEP PLAN?
To provide retirement income for ourselves and our families.
Unlike qualified plans, they are easy to administer.
Unlike qualified plans, employees are 100% vested in the employer contributions.
To defer paying taxes.• Contributions are not taxed• Distributions are taxed.
8
HOW DO WE CONTRIBUTE TO A SEP PLAN?
For 2013, an employer may contribute up to 25% of the employee’s compensation, providing the contribution does not exceed $51,000.
Example: Matt owns his own business and does not have any employees working for him. He is planning on paying himself $250,000 this year in salary. If he opens up a SEP plan, what is the maximum contribution he can make to the plan this year ?
Maximum Annual Contribution to SEP= The lesser of $51,000 or (Salary * 25%)
Maximum Annual Contribution to SEP= $250,000 * 25%
Maximum Annual Contribution to SEP= $250,000 * 25% = $62,500
Maximum Annual Contribution to SEP= $51,000
9
PLAN LIMITS
As a comparison…
2013 401k SEP IRA$17,500 = Employee Contribution Limit
Employees do not contribute unless they are self-employed.
$51,000 =Total Employer/Employee Contribution Limit
25% or $51,000 – Contribution Limit for Employer or Self-employed Person (whichever one is smaller)
Compensation (Salary)
Cap
? ?
10
SEP IRA DISTRIBUTIONS
In general, distributions from a SEP IRA must occur after age 59½.
In general, distributions that occur before 59½ will be charged a 10% early distribution penalty.
There are some exceptions to the 10% penalty rule.
A SEP IRA owner must begin required minimum distributions (RMDs) the year he or she reaches age 70½.
11
A LOOK AHEAD…
Case Study #4
Traditional IRAs
12
QUESTIONS???
top related