Traditional and SEP IRAs

Save for retirement and gain tax advantages

About Traditional IRAs

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.

About Simplified Employee Pension (SEP) IRAs

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
Contribution deadline	April 18, 2017 for 2016 tax year
Tax advantages
Contribution	Tax deductible (subject to certain limitations)
Earnings	Tax deferred (taxed when you begin withdrawing)
Withdrawals	Taxable (except withdrawals of non-deductible contributions)
Contributions
Eligibility	Anyone with earned income may contribute up until age 70½.
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 2016 or 2017 tax years ($6,500 for age 50 and older).
Withdrawals
Penalty free	Withdrawals after age 59½
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.)
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 $53,000 for the 2016 plan year or $54,000 for the 2017 plan year.
  

Tax-deferred growth potential

• Any investment earnings grow tax-deferred until withdrawn.
• The maximum compensation on which contributions can be based is $265,000 for the 2016 plan year or $270,000 for the 2017 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 $53,000 for the 2016 plan year or $54,000 for the 2017 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 $265,000 for the 2016 plan year or $270,000 for the 2017 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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