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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
there is still a tax-beneficial retirement savings option available to you: Simplified Employee Pension IRAs. Simplified Employee Pension IRAs: The 401(k) Alternative for the Self-Employed or Small Business Owner By Britt Erica Tunick It goes without saying that is you have the option to invest in a 401(k) plan you should do so. But what if you are self-employed, own your own small business or freelance for a living? Fear not, there is still a tax-beneficial retirement savings option available to you: Simplified Employee Pension IRAs. Known more commonly as SEP IRAs, these savings vehicles operate the same way as traditional IRAs do –allowing individuals to save for the long-term without being taxed on the money placed into them until the time it is removed for retirement. But while the amount that can be invested into traditional IRAs is capped at $6,500 annually, SEP IRAs allow for up to 25% of an individual’s income, capped at a maximum of $52,000 for 2014. As with any long-term retirement savings, the main benefit of SEP IRAs is the compounding growth of any money invested in them, meaning the more you put in them, the quicker your holdings will grow through earnings and any annual interested they generate. SEP IRAs can be opened in banks, through brokerage firms or through companies the offer mutual funds. But do your homework before opening one and be sure to compare fees, as the fees related to these products tend to be quite low, and in some cases even non-existent. SEP IRAs are also incredibly flexible, allowing holders of these vehicles to wait to invest for any given year until after they have filed their taxes –flexibility that gives you the opportunity to determine just how much you can afford to invest each year and to alter your contributions based on other expenses that may arise in your life. |
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