explain the diffrints of a Ira /Sep and a Simple

[JohnB5677]

Yes, I'll do my best to recap these three retirement plans.

1) An IRA is an Individual Retirement Account.  The other two are accounts that are sponsored by a business.

• The maximum contribution for all your IRAs (Traditional and Roth) combined is: 
  • if you're under age 50. $6,500 (for 2023) and $7,000 (for 2024) 
  • if you're age 50 or older. $7,500 (for 2023) and $8,000 (for 2024) 
  • These contributions may be limited is you have a retirement plan at work.
  • To determine the amount you can deduct for your IRA, including if you have a retirement plan at work, you can calculate it with the following guidelines.
    • For calculation for a a Traditional IRA see: Worksheet 1-1. Figuring Your Modified AGI (IRS Pub 590)
    • For calculation of a Roth IRA see: Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes (IRS PUB 590)
    • Once you have determined MAGI you can see the chart below the worksheet to determine the maximum contribution.

2) A SEP is a Simplified Employee Pension.

• A SEP is a retirement savings plan established by an employer for their employees and themselves. 
  • It can also be established by self-employed individuals. 
  • Employers can make tax-deductible contributions on behalf of eligible employees to their SEP IRAs.
  • The SEP IRA contribution limit for 2023 is 
    • 25% of eligible employee compensation, up to $66,000. 
    • The maximum compensation that can be considered for contributions in 2023 is $330,000.
• You can see more on the IRS publication Simplified Employee Pension Plan (SEP)

3)  A Simple plan to the Simple method to contribute toward employees' and their own retirement savings.

• The amount an employee contributes from their salary to a SIMPLE IRA cannot exceed 
  • $15,500 in 2023
  • $16,000 in 2024
• SIMPLE IRA rules: Contributions and limits
  • The company will make a non-elective contribution of at least 2 percent of compensation for all eligible employees earning at least $5,000.
  • Maximum compensation is $345,000 for the 2024 tax year.
  • Make a matching contribution of 100 percent up to the first 3 percent of compensation.
• You can see more on the IRS publication SIMPLE IRA Contribution Limits

I hope this is enough to get you started.  

Please contact us again with any additional questions.

[JohnB5677]

Yes, I'll do my best to recap these three retirement plans.

1) An IRA is an Individual Retirement Account.  The other two are accounts that are sponsored by a business.

• The maximum contribution for all your IRAs (Traditional and Roth) combined is: 
  • if you're under age 50. $6,500 (for 2023) and $7,000 (for 2024) 
  • if you're age 50 or older. $7,500 (for 2023) and $8,000 (for 2024) 
  • These contributions may be limited is you have a retirement plan at work.
  • To determine the amount you can deduct for your IRA, including if you have a retirement plan at work, you can calculate it with the following guidelines.
    • For calculation for a a Traditional IRA see: Worksheet 1-1. Figuring Your Modified AGI (IRS Pub 590)
    • For calculation of a Roth IRA see: Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes (IRS PUB 590)
    • Once you have determined MAGI you can see the chart below the worksheet to determine the maximum contribution.

2) A SEP is a Simplified Employee Pension.

• A SEP is a retirement savings plan established by an employer for their employees and themselves. 
  • It can also be established by self-employed individuals. 
  • Employers can make tax-deductible contributions on behalf of eligible employees to their SEP IRAs.
  • The SEP IRA contribution limit for 2023 is 
    • 25% of eligible employee compensation, up to $66,000. 
    • The maximum compensation that can be considered for contributions in 2023 is $330,000.
• You can see more on the IRS publication Simplified Employee Pension Plan (SEP)

3)  A Simple plan to the Simple method to contribute toward employees' and their own retirement savings.

• The amount an employee contributes from their salary to a SIMPLE IRA cannot exceed 
  • $15,500 in 2023
  • $16,000 in 2024
• SIMPLE IRA rules: Contributions and limits
  • The company will make a non-elective contribution of at least 2 percent of compensation for all eligible employees earning at least $5,000.
  • Maximum compensation is $345,000 for the 2024 tax year.
  • Make a matching contribution of 100 percent up to the first 3 percent of compensation.
• You can see more on the IRS publication SIMPLE IRA Contribution Limits

I hope this is enough to get you started.  

Please contact us again with any additional questions.