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Started By
Message
SEP IRA
Posted on 11/6/23 at 3:12 pm
Posted on 11/6/23 at 3:12 pm
Anybody do the SEP? I have meeting with accountant but got a few questions for anybody who has done it.
8
Posted on 11/6/23 at 3:26 pm to TDTOM
I'll find all this out in the meeting but does the "Business" have to open the account? Or does the individual open the account and the "business" fund it?
Posted on 11/6/23 at 4:26 pm to XenScott
Posted on 11/6/23 at 4:31 pm to XenScott
Is it just you? Do you have employees?
Posted on 11/6/23 at 6:54 pm to XenScott
I wonder if a roth sep option will be available at some point
Posted on 11/6/23 at 7:38 pm to XenScott
I am an employer with a SEP IRA. I write a check for each employee and deposit it with the financial institution which handles the SEP. The financial institution will set up the individual with an account. From there all I need is their account number. Once the check clears its no longer my business.
It is great to have if the company is a success, and gives the employee incentive to make it a success. It is liked by employees because they can get way more $ per year then by contributing on their own and an employer match to a 401K. I think the max contribution a year is $66,000, and goes up to $69K next year.
You are not obligated to fund the SEP each year, but you won't get the benefits either as every employee gets either a max 25% payout or $66,000. What I do it set up my salary to max out the $66K using the 25% method. Otherwise I would have to pay each employee $66K including the janitor. The contributions need to be even for everyone.
It has not happened yet, but I reiterate every year that this should never be expected, but it is in our best interest to pay into the SEP to save on taxes, and maintain morale. It gives them motivation to make the company better.
It is great to have if the company is a success, and gives the employee incentive to make it a success. It is liked by employees because they can get way more $ per year then by contributing on their own and an employer match to a 401K. I think the max contribution a year is $66,000, and goes up to $69K next year.
You are not obligated to fund the SEP each year, but you won't get the benefits either as every employee gets either a max 25% payout or $66,000. What I do it set up my salary to max out the $66K using the 25% method. Otherwise I would have to pay each employee $66K including the janitor. The contributions need to be even for everyone.
It has not happened yet, but I reiterate every year that this should never be expected, but it is in our best interest to pay into the SEP to save on taxes, and maintain morale. It gives them motivation to make the company better.
Posted on 11/6/23 at 7:47 pm to Mariner
quote:
goes up to $69K next year
Posted on 11/6/23 at 9:18 pm to XenScott
SEP is a good option if you are a 1099 or don’t have any employees.
If you do have employees you can still technically use it for the first 3 years of owning the business without contributing to the employees portion.
Once that goes away it gets very very expensive to pay for the employees portion so it’s better to switch to 401k/simple ira
If you do have employees you can still technically use it for the first 3 years of owning the business without contributing to the employees portion.
Once that goes away it gets very very expensive to pay for the employees portion so it’s better to switch to 401k/simple ira
Posted on 11/6/23 at 9:34 pm to TigerMan327
quote:
Once that goes away it gets very very expensive to pay for the employees portion so it’s better to switch to 401k/simple ira
Depends what you’re trying to do. Some places actually use their benefit packages to attract and retain top employees.
Posted on 11/6/23 at 9:52 pm to TDTOM
quote:
Is it just you? Do you have employees
Just me and a partner are actual employees. We are also the owners. Both doing equal SEP IRAs.
Posted on 11/7/23 at 6:09 am to XenScott
Yes.
I put it 25% of what I pay myself. It's more than double the regular IRA max.
I put it 25% of what I pay myself. It's more than double the regular IRA max.
Posted on 11/7/23 at 6:40 am to XenScott
If that’s the case a SEP IRA is a no brainer for you.
Posted on 11/8/23 at 9:12 pm to TigerMan327
Started with 2 employees 30 years ago. We have had a SEP the whole time. We now have 60+ employees. Make them wait 2 years before getting 1st contribution. We contribute 8% most years, sometimes 10%. Nobody ever leaves our company. Max income is $330,000 in 2023. Goes up a little every year. We have several folks who make more than $330,000/year. You have to contribute the same percentage of income for everybody. It’s a fair and great plan IMO. Employees see you are in it with them.
Posted on 11/9/23 at 5:38 am to dovehunter
I totally agree. The only challenge I see is if its a volatile business/industry. It only works if the business is consistently profitable and successful. So far so good for our business.
When you offer a SEP, its very hard for an employee to think that the grass is better somewhere else, especially when that distribution check gets deposited.
When you offer a SEP, its very hard for an employee to think that the grass is better somewhere else, especially when that distribution check gets deposited.
Posted on 11/9/23 at 9:31 am to Billy Blanks
quote:
I put it 25% of what I pay myself.
Be careful. Depending on your business set up, the “25%” max contribution of income really works out to a 20% contribution of income. There is a circular calculation in what income is eligible for the contribution, so once you deduct SEP it ends up being only 20% of your pre-SEP deduction income.
Posted on 11/9/23 at 6:42 pm to XenScott
You’ll be able to put more away with a 401k. But a SEP is simpler. If you’re trying to maximize your contributions then use a 401k.
Posted on 11/10/23 at 10:45 am to TX_Tiger23
Yeah. We looked in to it. This is more of a way to cut some taxes on our top end for high income years. This year I’ll be able to SEP the full 66K.
My wife will be able to do 20-30K.
It’s a simple way to cut our AGI by close to 100K.
I’m 56 so I’ll have access to it without penalty in a couple of years if I need it. My wife is 9 years younger so hers will be more of a retirement type savings. Mine is more of a tax dodge.
My wife will be able to do 20-30K.
It’s a simple way to cut our AGI by close to 100K.
I’m 56 so I’ll have access to it without penalty in a couple of years if I need it. My wife is 9 years younger so hers will be more of a retirement type savings. Mine is more of a tax dodge.
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