If you're not regularly plunking money into an IRA, you're probably doing your golden years a big disservice. As you can (and should) learn in our IRA Center, traditional IRAs reduce your current taxable income and let you stockpile growing dollars for tomorrow. And Roth IRAs ingest your post-tax dollars to leave you with a tax-free nest egg in the future. (There's a little more to it, of course -- so head over to the IRA Center.)

If you're self-employed, your situation is a bit different. You have a special investing opportunity -- the "simplified employee pension" plan, otherwise known as a SEP IRA. Here are some things to know about it:

  • You're eligible to invest in one if you earn (via a full-time or part-time job) any self-employed income, and in many cases if you're a sole proprietor of a small business.
  • You can make tax-deductible contributions each year of up to 25% of your income compensation (or $44,000 for 2006). Your contributions into the account will grow tax-deferred until withdrawn.
  • You can open a SEP IRA account at many financial institutions, such as mutual fund companies, brokerages or banks.

What's so great about SEP IRAs, then? Well, consider this: Many people can contribute much more into a SEP IRA than they could into a more conventional IRA. For traditional and Roth IRAs, the limit for 2006 is $4,000 for most people and $5,000 for those 50 and older. With a SEP IRA, if your income is around $60,000, you might be able to sock away $10,000 to $15,000 in a single year. That's a big difference in several ways. For one thing, it will significantly reduce your taxable income, thereby reducing your taxes. For another thing, it will put much greater sums to work in growing for your future needs.

Learn more about SEP IRAs from the IRS website. Head to our IRA Center for more information, too. It sports a handy comparison table showing details for the TD Ameritrade (NASDAQ:AMTD) and E*Trade (NYSE:ET) brokerages, which both offer SEPs. You might also want to simply poke around the websites of some other contenders for your investing business, such as Fidelity, Schwab (NASDAQ:SCHW), Merrill Lynch (NYSE:MER), Legg Mason (NYSE:LM), and Morgan Stanley (NYSE:MS).

Learn more about your options in Retirement for the Self-Employed.

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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.