Using a Self-Directed SEP IRA is a potential game-changer for anyone who wants more freedom to invest. Well…not exactly everyone. It’s called the SEP (Simplified Employee Pension) IRA because it has to be used for employees—even when you’re self-employed and count as your own employee. If you fit into a specific situation, like owning a small business or being self-employed, then the SEP IRA can be a tremendous way for you to create value in retirement investing. And with self-direction, you can have all sorts of options for how you choose to do that. But ultimately, you need to know the essential tips for using these accounts. Here’s what you’ll need to know.

Lowering Retirement Plan Costs with a Self-Directed SEP IRA

One significant advantage of the Self-Directed SEP IRA is its cost-effectiveness for businesses. Simply put, it’s cheaper than many other options. Unlike many employer-sponsored retirement plans, SEP IRAs have minimal operating and start-up costs. This makes them an attractive option for small businesses if you want to provide retirement benefits to employees without doing what many retirement plans do, which is breaking the bank.

Contributions to a Self-Directed SEP IRA are tax-deductible for employers, too. This allows them to reduce their taxable income while helping their employees save for retirement. This tax advantage can be particularly beneficial for businesses looking to maximize their tax savings while investing in their employees’ futures.

Self-Employed? You Can Still Benefit from a Self-Directed SEP IRA

If you’re self-employed, you might assume that employer-sponsored retirement plans are out of reach. However, with a Self-Directed SEP IRA, that’s not the case. If you’re self-employed, you’re considered both the employer and the employee, making you eligible to establish a SEP IRA plan for yourself.

Setting up a Self-Directed SEP IRA allows you to enjoy the same tax advantages and flexibility as any other employer, giving you the opportunity to build a robust retirement nest egg while reducing your taxable income. Overall, it helps incentivize more retirement investing because you’re able to get so much in savings on your tax burden—especially with the SEP IRAs’ higher contribution limits.

When you’re self-employed, you know the value of each dollar. That’s why so many people turn to SEP IRAs to get the most out of every dollar they earn. And there’s another advantage here that’s worth mentioning: your ability to contribute higher amounts than with other accounts.

Flexibility in Contribution Amounts

One of the most appealing features of the Self-Directed SEP IRA is its flexibility in contribution amounts. Unlike some retirement plans where contributions must remain consistent year after year, SEP IRAs allow for varying contribution levels.

As an employer, you have the discretion to decide how much to contribute to your employees’ SEP IRAs each year. While contributions must be made on a consistent percentage basis for all eligible employees, you won’t have to contribute the same dollar amount each year. This flexibility allows you to adjust contributions based on your business’s financial performance. Or you can consider some other factors, which offers you more adaptability in your retirement planning strategy.

This type of account offers small business owners and self-employed individuals a cost-effective, flexible, and tax-advantaged retirement savings solution. By taking advantage of the benefits of a Self-Directed SEP IRA, you can lower your retirement plan costs, provide valuable retirement benefits to yourself and your employees, and enjoy greater control over your retirement savings strategy.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.