If you’re self-employed, you may think that a regular IRA plan is your only retirement savings option. But there’s something else you may not even know exists: the SEP IRA (Simplified Employee Pension) Plan. And it offers some real advantages to freelancers.
In order to qualify for an individual SEP IRA, you must be self-employed in some way. That could mean owning your own business (with real live employees). But the good news is that it also applies to those of us who earn a living as hard-working freelancers / sole proprietors.
What’s so special about a SEP IRA plan?
While the SEP plan offers a lot of the same features of a traditional IRA, it also comes with some nice advantages:
Some of the similarities
- Easy to set up with the help of your banker or broker
- Tax deductible
- Your money grows tax-deferred until needed
- Withdrawals before 59 1/2 taxed as regular income and subject to 10% penalty for early withdrawal
- Withdrawals after 59 1/2 are taxed at your then current rate, but no withdrawal penalty
- Required minimum distributions by age 70 1/2