Traditional and SEP IRAs
Save for retirement and gain tax advantages
Anyone under age 70½ with earned income can contribute to a traditional IRA. Contributions may be tax deductible, and taxes on earnings are deferred until you withdraw funds from the account, so your investments have the opportunity to compound faster.
A Simplified Employee Pension Plan, commonly known as a SEP IRA, is a retirement plan specifically designed for self-employed people and small-business owners. Its key features are highlighted below. When establishing a SEP IRA plan for your business, you and any eligible employees establish your own separate SEP IRA; employer contributions are then made into each eligible employee's SEP IRA.
Traditional IRAs
Apply |
Traditional/SEP IRA Application ( pdf) |
Minimum to open |
$1,000 |
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Contribution deadline |
April 17, 2018 for 2017 tax year |
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Tax advantages |
Contribution |
Tax deductible (subject to certain limitations) |
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Earnings |
Tax deferred (taxed when you begin withdrawing) |
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Withdrawals |
Taxable (except withdrawals of non-deductible contributions) |
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Contributions |
Eligibility |
Anyone with earned income may contribute up until age 70½. |
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Annual contribution amounts |
You may contribute simultaneously to a traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (traditional or Roth) IRAs is no more than $5,500 for the 2017 or 2018 tax years ($6,500 for age 50 and older). |
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Withdrawals |
Penalty free |
Withdrawals after age 59½ |
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Penalty |
- If you do not start required minimum distribution withdrawals by age 70½, you will face a penalty. Special distribution rules may apply.
- Withdrawals before age 59½ are subject to a 10% penalty. (Exceptions are listed below.)
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Exceptions to penalty |
- Higher education expenses for you or family members; expenses include tuition, fees, books, supplies, and room and board (must be enrolled at least part time).
- First-time home purchase expenses ($10,000 lifetime limit) to buy, build, or rebuild a first home for you, your parents, children, or grandchildren; you must not have owned a home within the past two years.
- Death or disability.
- Certain long-term unemployment expenses.
- Certain medical expenses including qualifying health insurance costs for certain unemployed individuals and unreimbursed expenses exceeding 7.5% of AGI.
- Withdrawals made in equal installments over the account holder's life expectancy.
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Simplified Employee Pension (SEP) IRA
Plan eligibility
Tax advantages
SEP IRA deadline
Contribution Flexibility
Open a SEP IRA
Plan eligibility
You can establish a SEP IRA if you:
- Are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);
- Earn any self-employed income by providing a service, either full-time or part-time, even if you are already covered by a retirement plan at your full-time job.
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Tax advantages
Tax-deductible contributions
- Up to 25% of compensation, as much as $54,000 for the 2017 plan year or $55,000 for the 2018 plan year.
Tax-deferred growth potential
- Any investment earnings grow tax-deferred until withdrawn.
- The maximum compensation on which contributions can be based is $270,000 for the 2017 plan year or $275,000 for the 2018 plan year. For self-employed individuals, compensation means earned income.
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SEP IRA deadline
The deadline to open and contribute to a SEP IRA is:
- Your tax filing deadline (including any extensions).
- For most self-employed individuals and small-business owners, that deadline is usually April 15.
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Contribution flexibility
- No annual contribution required. Contribution percentage can vary each year, from 0% - 25% of compensation, up to $54,000 for the 2017 plan year or $55,000 for the 2018 plan year.*
- All SEP IRA contributions must be made by the employer, and the same percentage of compensation must be contributed for each eligible employee (based on W-2 wages) including the employer
* The maximum compensation on which contributions can be based is $270,000 for the 2017 plan year or $275,000 for the 2018 plan year. For self-employed individuals, compensation means earned income.
Plan simplicity
- No complicated forms to fill out
- No annual reports for you to file with the IRS.
Attractive benefit for employees
- Offering a retirement plan can make it easier to attract and retain valuable employees.
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Open a SEP-IRA
Investing in a SEP IRA is easy. If you're ready to open a SEP IRA or transfer your SEP IRA assets from another institution, select one of the options below.
- To get started, Open a No-Fee SEP IRA.
- If you would like assistance completing the application or would prefer to discuss your options, call 1-800-400-MIDAS (6432).
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