Hello samasing12,
The main benefits of setting up SEP IRA is tax deduction. You can contribution up to 25% of profit into your SEP IRA. Unlike regular IRA, you can contribute to SEP even if you are covered by other retirement plan assuming it is thru different company/employer. Also there is no requirement that you have to contribute each year. You can decide for each year if you want to contribute or not and how much. There are some limitation on how much you can contribute. For tax year 2024, max you can contribute is $69,000.
From IRS: https://www.irs.gov/retirement-plans/how-much-can-i-contribute-to-my-self-employed-sep-plan-if-i-par...
Employee contributions
Your total annual employee contributions to all the plans can't exceed your personal limit of $23,000 in 2024 ($22,500 in 2023, $20,500 in 2022, $19,500 in 2020-2021; $19,000 in 2019), plus an additional $7,500 in 2024 and 2023 ($6,500 in 2020-2022; $6,000 in 2015 - 2019) if you're age 50 or older. However, because the SIMPLE IRA plan limits your contributions to $16,000 in 2024 ($15,500 in 2023; $14,000 in 2022; $13,500 in 2020-2021), plus an additional $3,000 catch-up contribution.
If you participate in more than one retirement plan that allows you to make salary deferrals (such as a 401(k) or a 403(b) plan), your total annual employee contributions to all the plans can't exceed your personal limit of $23,000 in 2024 ($22,500 in 2023; $20,500 in 2022; $19,500 in 2020 and 2021 and $19,000 in 2019, plus an additional $7,500 in 2024 and 2023 ($6,500 in 2020, 2021 and 2022 and $6,000 in 2015 - 2019) if you're age 50 or older. However, because the SIMPLE IRA plan limits your contributions to $16,000 in 2024 ($15,500 in 2023; $14,000 in 2022 and $13,500 in 2020-2021), plus an additional $3,000 catch-up contribution, this is the maximum amount you can contribute to your SIMPLE IRA plan.
Employer contributions
Your employer must either:
- match your salary deferrals, on a dollar-for-dollar basis, up to 3% of your compensation, or
- make a non-elective contribution of 2% of your compensation (taking into account no more than $345,000 of compensation in 2024 ($330,000 in 2023; $305,000 in 2022; $290,000 in 2021 and $285,000 in 2020).
Here are couple of more useful links.
https://turbotax.intuit.com/tax-tips/retirement/boost-your-retirement-savings/L3lryQHVz
https://www.irs.gov/retirement-plans/plan-participant-employee/sep-contribution-limits-including-gra...
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