If you're a freelancer, you probably know all about time management and how difficult it can be. Between running your own business, establishing new client relationships, and getting your actual work done, the days can go fast.
It makes subjects like retirement planning seem almost lofty. Who has time for the extra administration? The calculations?
This is exactly why you should consider the SEP IRA. Here are the three defining features that make these accounts so powerful for freelancers.
1. It's ridiculously easy
SEP IRAs can typically be opened online with one form. You don't have to do any IRS filing or other plan documents, so you can basically just have it ready from the word go.
There are really simple limits on contributions, so you can just go along with those and not waste precious brain space on the subject of matching. For freelancers who don't have any employees, you can contribute 25% of net earnings up to a maximum of $52,000 for 2014 or $53,000 for 2015.
2. It offers you a great contribution limit
Depending on your income, SEP IRAs can give you a huge leg up over an individual IRA. But the employer contribution does require some calculating. What is 25% of net earnings, you ask? For those of us who work as sole proprietors, it just means the net profit from your Schedule C tax form minus self-employment tax. Here's one online calculator that you can use, which further reduces the mental drain of this computation.
3. It is fabulous for procrastinators
As mentioned, time flies when you work for yourself. It flies so fast that you may be wondering a) how it's 2015 already, and b) why you didn't take the time to figure out a retirement plan before the end of the year.
Luckily, unlike other plans, the SEP IRA can be set up all the way to your tax filing deadline. That means that if you file an extension, you have until October to deal with your 2014 setup and contribution. Of course, I wouldn't advise waiting until the last minute, but if you're already at that point, it's a great bonus.
So, if you're a freelancer without employees, and you want an easy way to set aside more money for retirement, take a look at the SEP IRA. It may be just the ticket.
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