Self-employed Retirement Plan

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This topic contains 2 replies, has 3 voices, and was last updated by  Josh Johnson – Ambassador 1 year, 10 months ago.

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  • #2085 Reply

    I’m wondering if there is a minimum amount I need to earn in my business before I’m eligible to set up a SEP?

    #2198 Reply

    Hi Kelly, there isn’t a minimum you have to earn to set up a SEP, but there are some rules about who is eligible to participate. First, the SEP -IRA plan is set up by an employer for its employees (including yourself if you’re the business owner and an employee). Contributions are made by the employer on your behalf and generally, employees are eligible to participate if you are at least 21 years old, will make $600 in 2016, and have worked for that employer in 3 of the last 5 years.

    Like other retirement plans, there’s the employer contribution and then your personal contribution to consider. The employer contribution can be up to 25% of compensation (or $53,000, whichever you hit first). The individual contribution is capped at $5,500 if you’re under 50; $6,500 if you’re 50+. It’s important to know that the IRS limits your contributions to *all* IRAs to that level..so you have to add up your contributions across IRAs to make sure you don’t overcontribute.

    If you’re self-employed but not an “employee” for tax purposes, there are other options to consider, too – like a solo 401k. Let us know how you’re doing as you weigh the options and if we can answer any other questions. And congrats on taking this important step for yourself!

    #2575 Reply

    As a business owner myself, this is something I’ve spent many a sleepless night contemplating. It’s good to know that there are actual options for someone like me and for self-employed people, everywhere.

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