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contribution limits

Discussion in 'Money & Finance Forum' started by ville4life, Aug 30, 2006.

  1. Aug 30, 2006 at 11:07 PM #1
    ville4life

    ville4life What's the soup du jour?

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    am i missing something, or are the annual contribution limits for a SEP-IRA a lot higher than either a traditional IRA or 401k? if i'm not missing anything, what's the reason for the difference?
     
  2. Aug 30, 2006 at 11:49 PM #2
    Angie

    Angie Full Access Member

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    Here's more than you ever wanted to know, with links to Fidelity website.



    About SEP-IRAs

    A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners. Its key features are highlighted below. When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employee’s SEP-IRA.
    [​IMG]Plan eligibility[​IMG]Tax advantages[​IMG]SEP-IRA deadline[​IMG]Contribution flexibility[​IMG]Other key advantages[​IMG]Special Fidelity benefits[​IMG]Open a Fidelity SEP-IRA Plan eligibility


    You can establish a SEP-IRA if you: • Are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);• Earn any self-employed income by providing a service, either full-time or part-time, even if you are already covered by a retirement plan at your full-time job.
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    Tax advantages

    Tax-deductible contributions • Up to 25% of compensation, as much as $42,000 for the 2005 plan year and $44,000 for the 2006 plan year.*Tax-deferred growth potential • Any investment earnings grow tax-deferred until withdrawn.* The maximum compensation on which contributions can be based is $210,000 for the 2005 plan year and $220,000 for the 2006 plan year. For self-employed individuals, compensation means earned income.
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    SEP-IRA deadline


    The deadline to open and contribute to a SEP-IRA is: • Your tax filing deadline (including any extensions).• For most self-employed individuals and small-business owners, that deadline is usually April 15.
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    Contribution flexibility

    No annual contribution required • Contribution percentage can vary each year, from 0% - 25% of compensation, up to $42,000 per participant for the 2005 plan year and $44,000 for the 2006 plan year.*• All SEP-IRA contributions must be made by the employer, and the same percentage of compensation must be contributed for each eligible employee (based on W-2 wages) including the employer.• Use our worksheet to calculate your SEP-IRA contribution.* The maximum compensation on which contributions can be based is $210,000 for the 2005 plan year and $220,000 for the 2006 plan year. For self-employed individuals, compensation means earned income.
     

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