by astanhaus


Translation: Simplified Employee Pension- Individual Retirement Account.

What’s simplified about this type of IRA? The contribution. Regardless of status (AKA both Queen bees and low men on the totem pole), employees receive employer contributions that are the same percentage of their individual compensations.

Cool! Sign us up, right?

One flaw is that we, as employees, don’t have a say in whether we have a SEP-IRA or not. Employers are the ones who set them up, and determine the percentage that determines the $$ contributions. Another potential con is that a company is not required to annually contribute. So if business is bad, there may be no contribution that year.

Want more info? Check out the IRS’s description.

I know SEP-IRAs will not be a reality to many people. But it’s my new life goal to understand almost all of the IRAs. Tomorrow my goal will be complete when I explain SIMPLE IRAs.

(Originally published on Amanda Stanhaus’s financial literacy blog XO, Bettie.)