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I am self-employed and set up as a S-Corp. I am the only employee.

Can I have a SEP IRA? If so, how much can I contribute...?

If not what are the alternatives?

Thanks in advance for the advice!

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> I am self-employed and set up as a S-Corp. I am the > only employee.

Good, makes things simpler.

> Can I have a SEP IRA? If so, how much can I
> contribute...?

Depends on how much you make. You can contribute up to 15% of your W2 income, up to a maximum of $24K or so.

> If not what are the alternatives?

For a 1-person S-Corp, IMO, there are no other alternatives that make sense. SIMPLE-IRA is more paperwork and has a lower limit. Anything else (Money Purchase and/or Profit Sharing) are more complicated to run (and have onerous IRS reporting requirements).

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It is hard to belive how easy the SEP IRA is to set up.
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Thank you for the advice!

If I do set up a SEP IRA and contribute at least $2000, does this disqualify me from contributing to a Roth or standard IRA?

I am trying to duplicate the same benefit that an employee gets from being able to contribute to a company plan and an IRA.

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<< If I do set up a SEP IRA and contribute at least $2000, does this disqualify me from contributing to a Roth or standard IRA?

I am trying to duplicate the same benefit that an employee gets from being able to contribute to a company plan and an IRA. >>

No, the SEP contributions are not counted against your individual contributions. (e.g. no more so than if you had a regular day job and were contributing to a qualified retirement plan there).


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Greetings, Nahogan, and welcome.

<<I am self-employed and set up as a S-Corp. I am the only employee.

Can I have a SEP IRA? If so, how much can I contribute...?>>


Yes, you may have a SEP-IRA to which you may contribute up to 15% of your salary. The salary is capped at $160K this year, which means the maximum dollar contribution cannot exceed $24K. See IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, Keogh) for details. You may download it at http://www.irs.ustreas.gov/prod/forms_pubs/index.html .

Regards…Pixy

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Nahogan asks:

<<If I do set up a SEP IRA and contribute at least $2000, does this disqualify me from contributing to a Roth or standard IRA?>>

No, it does not. You may contribute up to $2K per year to the Roth at the same time you make contributions to your SEP as long as you meet the Roth AGI limits (i.e., and AGI of $95K or less (single) or $150K or less (joint)).

Regards….Pixy

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<<If not what are the alternatives?>>

If you are incorporated, you can establish both a 401(k) plan and a money purchase pension play. You can put up to 15% in the 401(k) and 10% in the money purchase plan. This would allow you to defer up to 25% of your pay.

Your discount broker (e.g., Charles Schwab) can direct you to an organization that can provide you with approved prototype plans. We did this several years ago for our 2-person corporation. It will be a pain to to set these plans up, but the power of tax-deferred compounding of your retirement savings will make it worth while. The annual reporting to the IRS isn't too difficult after the first time.

Good luck,

Don


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<< If you are incorporated, you can establish both a 401(k) plan and a money purchase pension play. You can put up to 15% in the 401(k) and 10% in the money purchase plan. This would allow you to defer up to 25% of your pay. >>

Why on Earth would a one person corp want a 401K??? This is the most expensive, rule-heavy plan there is (except for certain defined benefit plans). Some folks run paired money purchase and profit sharing plans (10% + 15%).

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