I haven’t been in the blog space very long, but quickly noticed how many entrepreneurs have created a personal brand empire. With affiliate marketing, e-courses and webcasts, some of you are pulling in six and seven figures a year. I have two things to say on that note: congratulations and wow.
I have been in the financial industry for a really long time and specialize in retirement planning. A large organization with a 401(k) plan and a company match can get expensive. But if you are a sole owner, you can save without having to pay for other employees. This is a golden opportunity for you to squirrel away some serious cash.
If you are a successful blogger or business owner, you should capitalize on your earnings now in a tax deferred retirement plan. Sounds complicated and stuffy? It doesn’t have to be. You can open a SEP IRA (Simplified Employee Pension) very easily through most fund companies. Check out CharlesSchwab.com or AmericanFunds.com.
By opening a SEP IRA you can contribute up to 25% of your pay up to a maximum of $53,000 per year. The IRS compensation limit is $265,000 for 2016. This means if your income exceeds the $265,000 limit, only $265,000 will be counted for plan purposes.
Key Takeaways of SEP IRAs
- Easy to set up and operate (https://www.irs.gov/pub/irs-pdf/f5305sep.pdf)
- Inexpensive to maintain
- Flexible annual contributions
- No IRA filing requirements
- Available to sole proprietors, partnerships and corporations
- Wide range of investments
- Always owned and controlled by the employee or you if you are both the owner and employee
Frequently Asked Questions
How much can I contribute if I am self-employed?
You can contribute the same amount based on earned income. Please consult with your CPA to calculate your earned income. I also have a worksheet under the Resource tab of my blog.
When is the deadline to contribute to a SEP IRA?
You must deposit contributions for the year by the due date – including extensions – of filing your federal income tax return. For example, if you are a sole proprietor and open a SEP IRA for 2016, you have until October 15, 2017 to fund your 2016 contributions.
What if I have employees?
If you have employees, you will have to contribute the same percentage to their SEP IRA as you contribute to your account.
What if I need to take money out of my SEP IRA?
If you take a withdrawal before age 59.5 you will incur a 10% penalty.
How long can I leave a balance in my SEP IRA?
IRS requires you start taking distributions at age 70 ½.
Opening a SEP IRA for 2016 may be a win-win for you. You can start saving and lower your gross taxable income. Remember saving and investing early is key to building your golden retirement nest egg.
If you have any questions, feel free to email me at email@example.com.
 Employee must be 21, worked three of the last five years and have income of $600 for the year.