408(d)(3)(H), the rollover in step two above could consist of any combination totaling $53,000 (for example, $53,000 of her $55,000 traditional IRA balance), leaving basis of $32,000 in her IRAs (in this example, $2,000 in her traditional IRA, $20,000 in her SEP-IRA
, and $10,000 in her SIMPLE IRA).
Profit Sharing Plan--An employer-funded retirement plan with more flexibility in plan design than a SEP-IRA
, but still allows contributions of as much as 25 percent of compensation on a tax-deductible basis up to the annual dollar limit.
When first starting out, you may find that a SEP-IRA
or SIMPLE IRA is the most appropriate choice for you.
Higher contribution limits--You can contribute more money to a Solo 401(k) on less income than you can to an IRA, Simple IRA, or a SEP-IRA
Like a SEP-IRA
, a Solo(k) allows a maximum of $50,000 in pre-tax contributions, but offers the additional benefits of enabling account owners to make pre-tax or after-tax investments in an S Corporation and life insurance.
Small businesses can set up a SEP-IRA
plan by completing IRS form 5305-SER or its equivalent, which may be obtained from any retirement plan provider.
At the same time that the SEP is set up, each employee should set up a SEP-IRA
account at a bank or other financial institution.
Up to 15 percent of compensation, to a maximum of $30,000, can be placed in a SEP-IRA
account for each individual every year.
More than half (55 percent) using a SEP-IRA
did not know that the plan is funded solely by employer contributions.
Plan Type Old Fees New Fees SEP-IRA
$50 per year NONE If account balance less than $10,000 SIMPLE IRA $50 per year if account NONE balance less than $10,000; $100 per year plan level fee if plan assets less than $50,000 - Individual 401(k) $45 per year if account NONE balance less than - 403(b)(7) $100,000 - Qualified Retirement Plan (profit sharing, money purchase) - Keogh
With proper consultation from an accountant, it may make sense for you to establish a SEP-IRA
account, which will allow you to save additional income tax-deferred at higher levels than an ordinary IRA (up to 25% of an employee's compensation, providing the contribution does not exceed $40,000).
We can show you how to buy this business within an IRA, SEP-IRA
, 401k or KEOUGH plan WITH NO PENALTY.