| Topic - Soup to Nuts: SEP, SIMPLE and Keogh Plans | Education Center |
If you work for yourself, or for a small company, your employer might offer you a retirement account such as a SEP-IRA, SIMPLE IRA, or Keogh plan. The principle behind all of these is exactly the same -- you and/or your company can contribute pre-tax money to your retirement account, getting a tax break and allowing your money to grow unimpeded by taxes.
The Keogh plan (also known as a Qualified Retirement Plan, or QRP) is designed for a self-employed individual or small business. It allows you to contribute a significant amount of your income, either 15 percent of compensation or $24,000 annually, or up to 25 percent of compensation or $30,000 annually.
A Savings Incentive Match Plan for Employees (SIMPLE), allows companies with 100 or fewer employees to offer a SIMPLE IRA plan. Your employees can defer a portion of their salary as in a 401(k), up to $6,000 annually, and receive an employer contribution as well.
In a Simplified Employee Pension (SEP) IRA, you can make generous tax-deductible retirement contributions (up to $24,000 per year, or 15 percent of the employee's compensation, whichever is smaller) for yourself and any employees. This is the easiest and most economical business retirement account to set up in most cases. These accounts are tailored for small businesspeople, with only some fairly uncomplicated paperwork required to start and operate (hence the name "Simplified Employee Pension"). Almost any brokerage, bank, or mutual fund company can help you establish a SEP-IRA.