SEP IRAs

For a small business or a sole proprietor, a Simple Employee Pension (SEP) plan may be an attractive retirement solution because it offers: 

Easy startup
Low administrative costs
Flexible contribution terms
A potential three-year $500 tax credit for setting up the plan
Earnings grow tax-deferred
Under a SEP, employers contribute to Individual Retirement Accounts (IRAs) established for employees.

Any earnings grow tax-deferred, which means employees don’t pay taxes until they withdraw the money. Withdrawals made prior to age 59½, however, may incur a 10% tax penalty and ordinary income taxes.

Another benefit is that employees are always 100% vested  in their SEP account.

SEPs designed for simplicity
SEPs are popular with self-employed workers and small business owners as a way for employees to save for retirement without complicated administrative paperwork.

Almost any business can set up a SEP IRA plan, including a sole proprietorship, partnership, and unincorporated or incorporated business, including Subchapter S corporations.

Higher contribution limits
With a SEP IRA, employers can contribute up to 25% of an eligible employee’s salary up to $46,000 in 2008.

Not only can the company take a tax deduction for its contributions, but contributing is not mandatory, so there’s flexibility to discontinue them if the company’s financial situation changes.

The next step
Learn more about setting up a SEP IRA by contacting a Nationwide professional.

Neither Nationwide® nor its representatives provide tax or legal advice. You should consult your attorney or other professional advisor for answers to specific questions.