Latest news with #SEPIRA
Yahoo
13-06-2025
- Business
- Yahoo
A complete guide to SEP IRAs: Why those who are self-employed should take a look
A SEP IRA is a tax-advantaged retirement account that's an especially attractive option for workers who don't have access to an employer-sponsored plan. The annual contribution limits for an SEP IRA are significantly higher than those of traditional and Roth IRAs. A SEP IRA could be an ideal retirement plan if you own your own business and don't hire other employees. About 16.5 million people in the U.S. are self-employed, according to 2023 data from the Bureau of Labor Statistics. For many of these workers, planning for retirement has its own quirks and challenges. They can't rely on a company for a retirement plan, and the modest contribution limit for a traditional or Roth IRA just isn't going to cut it. Rather than run the risk of having a lower standard of living in retirement, self-employed workers do have other savings options to boost the size of their retirement nest egg, including the SEP IRA. With a higher contribution maximum and a lot of flexibility, the SEP IRA might be the retirement plan that best suits many self-employed workers. A SEP IRA, or Simplified Employee Pension Individual Retirement Account, has many features similar to an IRA, but comes with a few extra perks that make it especially desirable for those without an employer-sponsored plan. A SEP IRA is a tax-advantaged retirement plan for anyone who is self-employed, owns a business, employs others, or earns freelance income. SEP IRA contributions are considered employer contributions, so the business makes them to the employee (which may be you). The SEP IRA is designed for simplicity — especially if you own your own business and don't hire other employees. Make tax-deductible (traditional) or after-tax (Roth) retirement contributions as a self-employed person Contribute the lesser of 25 percent of your income or $70,000 in 2025 Easy to open with an account provider Must contribute an equal percentage of compensation for any employees First of all, rather than limiting your annual IRA contributions to $7,000 — the maximum that workers under age 50 can contribute to traditional and Roth plans in 2025 — SEP IRAs allow a company to contribute up to the lesser of 25 percent of your compensation or $70,000 in 2025. For workers who double as their own bosses, this also provides an opportunity to set aside more than they could in an employer's 401(k), which caps 2025 employee contributions at $23,500. The SEP IRA is subject to the same investment, distribution and rollover rules as IRAs, according to the IRS. Traditional SEP IRA: While you can take distributions from your SEP IRA at any time, withdrawals before the age of 59 ½ will be included in your taxable income and may be subject to a 10 percent tax penalty. Additionally, the IRS requires you to take required minimum distributions in the year you turn age 73, as you would with a traditional IRA. Roth SEP IRA: The Roth SEP IRA was created in 2023, as part of the SECURE Act 2.0. You may take out contributions at any point without tax or penalty, since you've already paid tax on the money. But any earnings withdrawn before the age of 59 ½ are subject to a 10 percent tax penalty. There are no required minimum distributions on Roth accounts. You're eligible to contribute to a SEP IRA if you're self-employed — even if you have other retirement accounts. If your business is a side hustle and you still have a regular employer, you can open a separate SEP IRA and contribute, while still socking money away in a 401(k) with that employer. Plus, a SEP IRA is different from an IRA, so you can contribute to both. 'For the self-employed individual, [a SEP IRA is] really an easy and cost-effective way to save a decent-sized chunk of money into a retirement plan,' says Tim Steffen, director of advanced planning at Baird, a financial advisor. Realize, though, that if you end up hiring people, the SEP IRA must treat them the same as you. If you contribute a large percentage of your earnings to a SEP IRA, you'll have to contribute that same percentage of your employees' income to their own retirement accounts. Qualified workers who need to receive the same percentage from your employer contribution as you do include those who: Are at least 21 years old Earn more than $750 annually Have worked in your business three out of the last five years Keep that in mind as you move forward. For some business owners, a SIMPLE IRA might offer a better solution. If you open a SEP IRA at a brokerage, the account allows you to invest in potentially high-return assets such as stocks and stock funds. But you'll also be able to invest in a whole range of securities offered by the brokerage, including bonds, options and more. The contribution limit for a SEP IRA for 2025 is straightforward. Your maximum contribution is the lesser of: 25 percent of the employee's compensation $70,000 Remember, the SEP IRA is an employer contribution (not an employee contribution), so it's made by the company rather than the individual worker. There are no catch-up provisions for older workers in SEP IRAs. The SEP IRA is a popular retirement plan for the self-employed because it offers many useful advantages, but it's not the perfect plan for everyone. Provides a way for you to save for retirement: If you're self-employed, you might not have many options for tax-advantaged retirement savings, and the SEP IRA can help. Tax-deferred or tax-free: You can choose to contribute on pre-tax basis (traditional) or after-tax basis (Roth), meaning your money will not be taxed until withdrawn or it will come out entirely tax-free, depending on which plan type you choose. Easy to set up: A broker offering SEP IRAs can guide you through a few simple steps after you fill out one IRS form. Make bigger contributions: Contribution limits are higher than traditional and Roth IRAs, as well as more than what you can contribute to a 401(k) at a typical employer, though a solo 401(k) may let you save even more. Flexibility: You don't have to contribute every year, whether for yourself or your employees. Employees must be treated the same as you: This is an employer-only contribution. Employees don't make their own contributions and you must contribute the same percentage of employee compensation as you do to your own SEP account. No catch-up contributions: If you're over the age of 50, there are no catch-up contributions like you see with IRAs and 401(k)s. However, the higher contribution limits of a SEP IRA might outweigh this negative. The SEP IRA is a popular retirement account, and those who have the option for a SEP IRA may also be considering a 401(k) or a Roth IRA account. Here are some of the key differences:A SEP IRA is available only if your employer offers it, and in some cases, the employer may be you. If you're a single freelancer, the account allows you to stash as much as 25 percent of your company's earnings in your account tax-deferred, up to an annual maximum of $70,000 in 2025. The account's distribution rules are like those of a traditional IRA or Roth IRA, depending on which type of plan you've selected.A 401(k) is an employer-sponsored retirement plan that lets you save money on a tax-deferred or tax-free basis. Employees can save up to $23,500 in 2025, and employers may add matching funds into the account as well. The account comes in two major varieties: the (pretax) traditional 401(k) or the (after-tax) Roth 401(k). One-person businesses may also open a solo 401(k) and save even more.A Roth IRA allows anyone with earned income (or even spouses of those with earned income) to contribute. Contributions are made with after-tax money, and you'll be able to grow the account tax-free and then withdraw your money tax-free in retirement. Annual contributions are limited to $7,000 in 2025. The good news is that you can contribute to all these plans. However, your maximum contribution to the SEP IRA and the 401(k) together is $70,000 in 2025, including both employer and employee contributions. You can max out your employee contribution in the 401(k) at your day job, taking full advantage of an employer match there, and then still add money to your SEP IRA, until you hit the annual maximum. And regardless of how much you contribute to either a 401(k) or a SEP IRA, you're still able to contribute to a Roth IRA (or a traditional IRA), up to the annual maximum. Setting up a SEP IRA is simple. Start by filling out and filing IRS Form 5305-SEP. Rather than sending the form to the IRS on your own, you can use a broker like Fidelity Investments or Vanguard to sign up and provide the form for you. Compare SEP IRA custodians before making your choice, though. Review minimum investments, fees and investment options offered. Find out how other employees can access their accounts as well, should you choose to add employees. Remember: Your SEP IRA is a type of retirement account, not an actual investment. As with any investment account, how aggressively you invest and the types of assets you buy depends on your age, the age at which you plan to retire and your risk tolerance. Carefully consider your own future needs as you choose investments for your portfolio. In general, asset allocation models suggest that you weight your retirement portfolio toward stocks while you're young and further away from retirement. As you move closer to retirement, many experts suggest reducing the risk level of your portfolio and boosting its income component by rebalancing it to include more bonds. The reason? Stocks historically have generated bigger returns over the long term than fixed income assets, but suffer more price volatility in the short term. Your account provider should have a variety of stocks, ETFs, bonds and mutual funds to choose from. Each of your employees should have their own accounts with the provider so they can choose their own investments and asset allocation. If you're self-employed and looking for a way to contribute to a tax-advantaged retirement plan, a SEP IRA can be a good option. It offers you the chance to contribute a hefty sum each year and have your savings grow tax-deferred or even tax-free. A SEP IRA can be especially useful if you don't have any other employees (and don't plan to hire them in the future).. — Bankrate's Erin Kennedy contributed to an update of this article.
Yahoo
13-06-2025
- Business
- Yahoo
Fidelity Investments vs. Vanguard
Fidelity Investments and Vanguard are two of the largest asset managers in the world, with each offering a variety of low-cost funds to meet investors' needs. But they also operate online brokerages and rate well in Bankrate's annual review of the best brokers. Fidelity was named Bankrate's best broker in a number of investing categories in the 2025 Bankrate Awards. Fidelity stands out for its low fees, extensive lineup of account types, trove of research and education resources, along with helpful investing tools and great customer service. Vanguard offers thousands of no-transaction-fee mutual funds, including its own with rock-bottom expense ratios. Like Fidelity, the broker offers commission-free online trading of stocks and ETFs. Which one is right for you? That will depend on your unique circumstances and what features you're looking for in an online broker. Here's how Fidelity and Vanguard compare on some of the most common features. BROKER CATEGORY FIDELITY VANGUARD Stock and ETF commissions $0 $0 ($25 for phone orders) Options commissions $0.65 per contract $1 per contract for accounts below $1 million Account minimum $0 $0 Tradable securities Stocks, ETFs, bonds, mutual funds, options, cryptocurrency Stocks, ETFs, bonds, mutual funds, options Account fees No annual, activity or transfer-out fee $25 service fee for certain accounts (waived with $5,000,000 in Vanguard assets or email delivery of statements); $100 full account closure/transfer fee for certain accounts No-transaction-fee mutual funds 3,200+ 3,000+ Account types Individual and joint taxable, IRAs, small business (SEP IRA, solo 401(k), etc.), custodial, 529, HSA, managed portfolio, charitable and trust, among others Individual and joint taxable, IRAs, small business (SEP IRA, solo 401(k), etc.), custodial, 529, managed portfolio Mobile app Fidelity Mobile app on the Apple App Store and Google Play Store Vanguard mobile app on the Apple App Store and Google Play Store Fractional shares For purchases and dividend reinvestment Available on purchases of mutual funds and Vanguard ETFs; dividend reinvestment only on stocks/non-Vanguard ETFs Customer support Phone 24/7 availability, chat, email, 200+ branches Phone M-F 8 a.m. – 8 p.m. ET, email Fidelity and Vanguard both do a good job keeping costs fairly low, but Fidelity has a slight edge overall. Both brokers charge zero commission for stock and ETF trades, but Fidelity charges $0.65 per contract on options trades, while Vanguard charges $1 per contract for customers with less than $1 million in assets. When it comes to mutual funds, both Fidelity and Vanguard offer more than 3,000 funds with no transaction fees, making each broker an attractive spot for those saving for retirement or other long-term goals. Both firms offer a number of low-cost index funds, but Fidelity goes even further with its lineup of ZERO funds that charge no expense ratio at all. Account fees are non-existent at Fidelity, while Vanguard does charge a $25 fee in certain accounts, which can be waived if you have at least $5 million in qualifying Vanguard assets or sign up to have statements delivered electronically. Similarly, Vanguard's $100 processing fee for account closure and full transfer out does not apply to customers with high balances or those using a Vanguard-affiliated advisory service. Both Fidelity and Vanguard have no account minimum, allowing new investors to open accounts and then fund them with any amount when they're ready. However, if you're primarily interested in investing in mutual funds and don't have much in the way of savings to start with, Fidelity may be the better option. It offers a lineup of $0 minimum index funds, whereas Vanguard requires a $1,000–$3,000 minimum investment in its funds. That said, both brokers allow customers to invest as little as $1 in ETFs. Fidelity and Vanguard are also similar in terms of the number of tradable securities they offer. Both offer the standard choices of stocks, ETFs, mutual funds, bonds and options. Fidelity also recently began offering crypto trading in popular coins such as Bitcoin and Ethereum. This should meet the needs of most investors, but if you're looking for some of the more exotic areas of the market such as futures or forex, you'll need to use a different broker. You shouldn't have a hard time finding the type of account you're looking for at either broker, but Fidelity does offer a few more options than Vanguard. Both brokers offer standard account types such as individual and joint taxable accounts, IRAs (Roth, traditional and rollovers), small business retirement accounts (SEP IRA, SIMPLE IRA and solo 401(k)) and 529 plans. You'll also have robo-advisor options with Vanguard Digital Advisor and Fidelity Go. Fidelity also offers health savings accounts (HSAs), which some people use to save for healthcare costs, as well as trusts and charitable accounts. Both Fidelity and Vanguard should be able to meet the account needs of most investors, though. Fidelity separates itself here with its Stocks by the Slice fractional share offering that lets customers buy into any of the more than 7,000 stocks and ETFs for as little as $1 at a time. Vanguard doesn't offer fractional shares on new purchases of stocks and ETFs (unless it's a Vanguard ETF), only mutual funds. However, both brokers offer fractional shares on dividend reinvestments. Fractional shares have become a key offering in recent years as stock prices for popular companies such as Alphabet, Amazon and Tesla have, at times, increased into the thousands of dollars for a single share. Fractional shares allow investors an opportunity to invest in companies with high-priced stocks and make sure that their full amount gets invested, instead of sitting in cash while they wait to be able to afford a full share. Fidelity also has a slight edge in customer support, but both brokers should be able to answer any questions you may have in a timely manner. Fidelity is available to take calls over the phone 24 hours a day, 7 days a week, while also offering email and chat support. You can also get questions answered at one of the more than 200 branch locations they have throughout the country. Vanguard is also available to answer questions over the phone, but the availability is more limited at just 12 hours each day, Monday through Friday. You can also get questions answered over email. While each broker is a solid option for investors, the edge goes to Fidelity thanks to slight advantages in cost, the number of account types offered and their fractional shares offering. If these features matter to you, Fidelity is likely the best choice, but Vanguard isn't too far behind. If you already have significant assets with Vanguard, you may be able to wipe out some account fees, and the lack of fractional shares may not be a deal-breaker. Think about what matters most to you in an online broker; that should help you make your selection. You can always open accounts with both and benefit from the various features that each has to offer. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Business Wire
28-05-2025
- Business
- Business Wire
PensionBee Launches SEP IRAs To Include Non-Traditional Retirement Savers
NEW YORK--(BUSINESS WIRE)--PensionBee, a leading online retirement provider, announced today the launch of Simplified Employee Pension (SEP) IRAs in its digital platform. This offering provides a best-in-class retirement solution designed for self-employed individuals. Self-employed Americans consistently report lower levels of retirement preparedness. Only about 13% of self-employed individuals in single-person businesses participate in retirement plans, compared to nearly 72% of traditional employees. Share The launch comes at a critical time as the gig economy continues its rapid expansion. By 2025, gig workers are expected to make up nearly 50% of the U.S. workforce. This structural shift in employment patterns has created an urgent need for retirement solutions tailored to non-traditional workers, as traditional employer-sponsored retirement benefits become inaccessible to a growing segment of the workforce. Self-employed Americans consistently report lower levels of retirement preparedness. Only about 13% of self-employed individuals in single-person businesses participate in retirement plans, compared to nearly 72% of traditional employees. Fewer take advantage of SEP IRAs, highlighting a significant opportunity gap. 'Pursuing your passions should not come at the expense of future retirement security,' said Romi Savova, CEO of PensionBee. 'The addition of SEP IRAs to our platform allows us to empower self-employed Americans who may not have access to traditional retirement plans. Everyone deserves to plan for and enjoy a happy retirement.' Unlike traditional employees, self-employed Americans lack access to employer-sponsored retirement plans, automatic enrollment, and employer matching contributions that typically boost retirement readiness. This structural disadvantage affects millions of entrepreneurs and independent contractors who represent a growing segment of the American workforce. In response, self-employed individuals are more likely to claim Social Security early, potentially reducing lifetime retirement income. Beyond individual benefits, PensionBee's SEP IRA offering addresses a critical economic need. Small businesses represent over 99% of all U.S. businesses and create approximately two-thirds of new jobs. Despite this, reports show that one in five small business owners don't have any retirement savings, and the majority have saved less than $50,000. By providing modern retirement solutions for single business owners, PensionBee not only supports individual financial security but strengthens the economic foundation of American entrepreneurship. PensionBee's SEP IRA allows individual account owners to contribute up to 25% of their income, significantly higher than Traditional IRA limits, creating a powerful vehicle for retirement wealth accumulation. This higher contribution ceiling enables entrepreneurs to make up for periods of variable income and accelerate their retirement savings during profitable years. PensionBee's SEP IRA offers a complete solution for self-employed individuals: Consolidation of existing accounts: Users can transfer old retirement accounts (Roth IRA, Traditional IRA, or 401(k)) into one manageable account Higher contribution limits: SEP IRAs allow contributions of up to 25% or $70,000 of income, maximizing tax-advantaged savings Human Support: Easy setup and management with dedicated human support Retirement planning tools: PensionBee's in-app retirement calculator allows users to model various scenarios to work toward savings goals The SEP IRA offering is available immediately to all self-employed individuals and single business owners. PensionBee users can begin the setup process now with dedicated BeeKeepers available to guide them through account creation. The addition of SEP IRAs represents a significant milestone in PensionBee's mission to democratize retirement planning for all Americans, regardless of employment status. The company plans to continue expanding its offerings to address the evolving needs of today's diverse workforce, with additional features and educational resources specifically designed for self-employed savers planned for later this year. PensionBee's SEP IRA is the latest addition to a robust offering of retirement account types, including Traditional, Roth and Safe Harbor IRAs. About PensionBee PensionBee (LON: PBEE) is a leading online retirement provider, helping people easily consolidate, manage, and grow their retirement savings. The company manages approximately $8 billion in assets and serves over 275,000 customers globally, with a focus on simplicity, transparency, and accessibility. For more information about PensionBee's SEP IRA offering, visit
Associated Press
28-05-2025
- Business
- Associated Press
PensionBee Launches SEP IRAs To Include Non-Traditional Retirement Savers
NEW YORK--(BUSINESS WIRE)--May 28, 2025-- PensionBee, a leading online retirement provider, announced today the launch of Simplified Employee Pension (SEP) IRAs in its digital platform. This offering provides a best-in-class retirement solution designed for self-employed individuals. The launch comes at a critical time as the gig economy continues its rapid expansion. By 2025, gig workers are expected to make up nearly 50% of the U.S. workforce. This structural shift in employment patterns has created an urgent need for retirement solutions tailored to non-traditional workers, as traditional employer-sponsored retirement benefits become inaccessible to a growing segment of the workforce. Self-employed Americans consistently report lower levels of retirement preparedness. Only about 13% of self-employed individuals in single-person businesses participate in retirement plans, compared to nearly 72% of traditional employees. Fewer take advantage of SEP IRAs, highlighting a significant opportunity gap. 'Pursuing your passions should not come at the expense of future retirement security,' said Romi Savova, CEO of PensionBee. 'The addition of SEP IRAs to our platform allows us to empower self-employed Americans who may not have access to traditional retirement plans. Everyone deserves to plan for and enjoy a happy retirement.' Unlike traditional employees, self-employed Americans lack access to employer-sponsored retirement plans, automatic enrollment, and employer matching contributions that typically boost retirement readiness. This structural disadvantage affects millions of entrepreneurs and independent contractors who represent a growing segment of the American workforce. In response, self-employed individuals are more likely to claim Social Security early, potentially reducing lifetime retirement income. Beyond individual benefits, PensionBee's SEP IRA offering addresses a critical economic need. Small businesses represent over 99% of all U.S. businesses and create approximately two-thirds of new jobs. Despite this, reports show that one in five small business owners don't have any retirement savings, and the majority have saved less than $50,000. By providing modern retirement solutions for single business owners, PensionBee not only supports individual financial security but strengthens the economic foundation of American entrepreneurship. PensionBee's SEP IRA allows individual account owners to contribute up to 25% of their income, significantly higher than Traditional IRA limits, creating a powerful vehicle for retirement wealth accumulation. This higher contribution ceiling enables entrepreneurs to make up for periods of variable income and accelerate their retirement savings during profitable years. PensionBee's SEP IRA offers a complete solution for self-employed individuals: The SEP IRA offering is available immediately to all self-employed individuals and single business owners. PensionBee users can begin the setup process now with dedicated BeeKeepers available to guide them through account creation. The addition of SEP IRAs represents a significant milestone in PensionBee's mission to democratize retirement planning for all Americans, regardless of employment status. The company plans to continue expanding its offerings to address the evolving needs of today's diverse workforce, with additional features and educational resources specifically designed for self-employed savers planned for later this year. PensionBee's SEP IRA is the latest addition to a robust offering of retirement account types, including Traditional, Roth and Safe Harbor IRAs. For more information about PensionBee's SEP IRA offering, visit View source version on CONTACT: Media Contact: Adela McVicar [email protected] KEYWORD: NEW YORK UNITED STATES NORTH AMERICA INDUSTRY KEYWORD: PROFESSIONAL SERVICES BUSINESS APPS/APPLICATIONS TECHNOLOGY SOFTWARE FINANCE INTERNET SOURCE: PensionBee Copyright Business Wire 2025. PUB: 05/28/2025 09:14 AM/DISC: 05/28/2025 09:13 AM
Yahoo
26-05-2025
- Business
- Yahoo
Retirement savings: How can you save without a 401k?
(NewsNation) — Even if you don't have a 401(k), there are several ways you can make sure you are saving for your retirement. According to Fidelity, some of the other options you can consider include IRAs, SEP IRAs and self-employed 401(k)s. Are people 'panic buying'? Economist explains which big purchases you may want to make now Here are some of the ways you can save for retirement without a 401(k): An individual retirement agreement, or an individual retirement account, can be opened by anyone who has earned income. This includes those who might not have a job, but have a spouse who is employed. When choosing an IRA, you will need to choose between a Roth IRA and a traditional IRA. Summer travel may actually be cheaper to certain destinations, expert says A Roth IRA will allow your contributions and earnings to grow tax-free. You will be able to withdraw the money from your Roth IRA tax-free after you turn 59½, as long as your account has been open for at least five years. A traditional IRA allows you to contribute money before or after taxes. You can grow your money tax-deferred, however, you will pay ordinary income tax on your withdrawals. Also, you have to start taking distributions after you turn 73. There are no income limitations to opening a traditional IRA, unlike with a Roth IRA. A Simplified Employee Pension plan, or SEP IRA, could be a good option if you are self-employed or have freelancing income. If you are a sole proprietor or part of a partnership, C-corporation or S-corporation, you are eligible for an SEP IRA. Recent college grads face toughest job market in years Your contributions could be tax-deductible, according to Fidelity. Typically, employees aren't allowed to contribute, and only employers can. There is an option for employees to be able to make traditional IRA contributions, but these would count toward the annual limit for IRAs. If you want to set up an SEP IRA, you will need to do so before the federal income tax filing deadline. If you are self-employed, you could start a self-employed or solo 401(k). This also applies to you if you own a business or partnership that has no employees or if you have a spouse who works in the business. You can contribute to a self-employed 401(k) in two ways: as the employee and again as the employer. As an employee, you can make a tax-deductible or Roth contribution of up to 100% of what you are paid up to a maximum. Once you are over 50, you can make catch-up contributions. Texas woman who won $83.5 million jackpot still not paid 3 months later, sues Texas Lottery Commission As the employer, you can contribute up to 25% of your earnings that are considered eligible. These contributions will always be before taxes. As a small business owner, you could save a lot of money each year with a self-employed 401(k). The deadline to set up a plan is the employer's tax filing deadline. Other plans to consider are SIMPLE IRAs and a health savings account. A SIMPLE IRA is similar to a 401(k) in that it offers before and after-tax contributions. It also has an employee contribution and employer match. If you are self-employed or a small business owner, you can open a SIMPLE IRA. Trump tariffs set to collide with back-to-school shopping A health savings account, or HSA, you can benefit from tax deductions, tax-free growth potential and withdrawals that are tax-free to pay for any qualified medical expenses. These expenses could be paid for before or after your retirement. Then, after you turn 65, you can withdraw money from the HSA without facing any penalties. However, you will owe taxes on contributions and earnings. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
