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Simple vs SEP IRA
Old 10-23-2006, 04:39 PM   #1
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Simple vs SEP IRA

How many of you use a SIMPLE IRA as opposed to a SEP IRA. As a self employed individual with NO employees, it seems you'd be able to contribute more to the SIMPLE ( ?$11,000 per year) than to the SEP IRA ; assuming you don't have a high AGI. I believe as long as you make 11k AGI you can contribute and deduct the ENTIRE 11k with the SIMPLE, whereas with the SEP you'd only be allowed a fraction of this amount (? 40% up to $45k)

Is my understanding correct?
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Re: Simple vs SEP IRA
Old 10-23-2006, 04:50 PM   #2
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Re: Simple vs SEP IRA

Yes but the Solo 401(k) has the advantages of both.

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Re: Simple vs SEP IRA
Old 10-23-2006, 04:50 PM   #3
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Re: Simple vs SEP IRA

Quote:
Originally Posted by eridanus
Yes but the Solo 401(k) has the advantages of both.

I was just going to say that. Why not do a Solo K?
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Re: Simple vs SEP IRA
Old 10-23-2006, 05:35 PM   #4
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Re: Simple vs SEP IRA

Hi,

Depending on your income you can contribute a SH%^%^t load more to a SEP than a Simple.

I contributed $25k to $35k a ear for a few years but company had to match employees. I didn't care during Dot Com Bubble run up but after.

I switched to a Simple. I and my employees can put in up to $10,000 tax deferred/ Em[loyees can choose not t contribute which they do. Company can the contribute 3% of groos salary of all participants.

Google both plans. Do research before jumping in. Huge difference

W
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Re: Simple vs SEP IRA
Old 10-24-2006, 06:23 AM   #5
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Re: Simple vs SEP IRA

Just you (or you and spouse)? Definitely check into a Solo 401K if the limitations on ho much you can contribute are a concern. As previosly noted, you can put away far more in a Solo 401K than in a SEP or SIMPLE. Vanguard doesn't offfer them (yet), but Fidelity does (vey cheap) as well as some other companies.

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Re: Simple vs SEP IRA
Old 10-24-2006, 06:31 AM   #6
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Re: Simple vs SEP IRA

Am I correct in that the Solo 401k requires more paper work and "costs" than the SIMPLE or SEP IRA's. Again, my original post was if you're only grossing for example 11k as solo self-employed would not the SIMPLE make more sense than the SEP?
My thinking is I could earn this money(11k AGI) per calender year as a self employed individual and essentially not have to pay any taxes on it. This in a calender year would allow me to pay my business expenses plus contribute to the retirement plan all tax free.
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Re: Simple vs SEP IRA
Old 10-24-2006, 08:35 AM   #7
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Re: Simple vs SEP IRA

Go with the solo 401K. The paper work is honestly very simple and only kicks in after you have $100K or more in the account. Even then the form 5500 is no hassle at all. We use Fidelity and there are no costs involved other than the standard fees for any trades you make. I believe you can stash away 100% of the first 15K and the maximum this year is $44K.

We switched to a Solo 401K from a SEP 2 years ago and it has significantly boosted our contributions.
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Re: Simple vs SEP IRA
Old 10-24-2006, 02:52 PM   #8
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Re: Simple vs SEP IRA

Quote:
Originally Posted by ferco
Am I correct in that the Solo 401k requires more paper work and "costs" than the SIMPLE or SEP IRA's. Again, my original post was if you're only grossing for example 11k as solo self-employed would not the SIMPLE make more sense than the SEP?
My thinking is I could earn this money(11k AGI) per calender year as a self employed individual and essentially not have to pay any taxes on it. This in a calender year would allow me to pay my business expenses plus contribute to the retirement plan all tax free.
I missed part your original post, I was sleepy buzzed last night, 25 cent wing and taco night...

If you make $11k, you can put $10k into a SEP as tax deffered payroll deduction in 2006, not sure if it is going up in 2007. Company would/Could match up to 3% of your $11k or $330.00. You then have only $670.00 of income to pay your expenses.

Sounds easy to not make enough to pay taxes.

Good Luck

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