You must make a contribution for every employee who is eligible to participate in your SEP, even if they are over 70 ½ years of age. However, the employee must also make minimum payouts. If you make a SEP IRA contribution for the year, you can continue to contribute to either a Roth IRA or a traditional IRA for the same year, if you’re eligible. One of the main benefits of a SEP IRA over a traditional IRA or a Roth IRA is the increased contribution limit.
But although the Secure Act removes the age limit for traditional IRA contributions, IRA contributions are still subject to restrictions. The deadline to set up a SEP IRA is April 15, or the deadline for filing your company’s tax returns, including extensions. In addition, each institution, bank, or insurance company must provide a simple description of all fees and commissions it charges for withdrawals of SEP assets before the end of a specific period of time. Publication 590-A contains certain conditions under which you can avoid overpaid contributions being included in your gross income.
One advantage of Roth IRAs is that they offer tax-free growth throughout the life of the plan and that you can contribute to them well into your seventies. The maximum contributions you can make to an IRA can change from year to year, from plan to plan, and from income to income. At this point, an SEP plan holder can convert their retirement plans into a deferred pension with a lifetime income boost. The Simplified Employee Retirement Account (SEP) is an IRA for small business owners with one or more employees or people with independent (self-employed) income.
But it’s also worth noting that people over 65, who work longer hours today, tend to be wealthier, healthier and better educated than 65 year olds overall. Although you must have an income to make an IRA contribution, IRA contributions have income limits regardless of your age. Not only can they stash away assets without paying tax on them in terms of deductible contributions, but they won’t owe tax on the money from year to year.