SEP IRA
Hey there kiddo, today we're going to talk about something called a SEP IRA!
So, a SEP IRA is a type of retirement account for people who own their own businesses or are self-employed.
Here's how it works: Let's say your mommy owns a small business all by herself. She wants to save money for her retirement, but doesn't have a work-sponsored retirement plan like a 401k. Instead, she can set up a SEP IRA for herself, which stands for Simplified Employee Pension Individual Retirement Account.
The cool thing about a SEP IRA is that your mommy can contribute money to it for herself and any employees she might have (although it's not required for her to contribute to employee accounts if she doesn't want to).
Now, here's where it gets a little tricky, but bear with me.The amount your mommy can contribute to her SEP IRA (and any employee SEP IRA accounts) depends on how much money her business makes in a year.
As an example, let's say your mommy had a great year and her business made $100,000 (wow!). The most she would be allowed to contribute to her own SEP IRA account is 20% of that amount, or $20,000. She could also contribute up to 20% of each employee's salary if she has any employees participating in the plan. But remember, she doesn't have to contribute anything if she doesn't want to.
Now, here's the really important thing to remember: A SEP IRA is a type of retirement account, which means the money in it is meant to be saved for when your mommy is older and is ready to retire. So she can't take the money out whenever she wants without paying a penalty until she's at least 59 1/2 years old.
I hope this helps you understand what a SEP IRA is all about!
So, a SEP IRA is a type of retirement account for people who own their own businesses or are self-employed.
Here's how it works: Let's say your mommy owns a small business all by herself. She wants to save money for her retirement, but doesn't have a work-sponsored retirement plan like a 401k. Instead, she can set up a SEP IRA for herself, which stands for Simplified Employee Pension Individual Retirement Account.
The cool thing about a SEP IRA is that your mommy can contribute money to it for herself and any employees she might have (although it's not required for her to contribute to employee accounts if she doesn't want to).
Now, here's where it gets a little tricky, but bear with me.The amount your mommy can contribute to her SEP IRA (and any employee SEP IRA accounts) depends on how much money her business makes in a year.
As an example, let's say your mommy had a great year and her business made $100,000 (wow!). The most she would be allowed to contribute to her own SEP IRA account is 20% of that amount, or $20,000. She could also contribute up to 20% of each employee's salary if she has any employees participating in the plan. But remember, she doesn't have to contribute anything if she doesn't want to.
Now, here's the really important thing to remember: A SEP IRA is a type of retirement account, which means the money in it is meant to be saved for when your mommy is older and is ready to retire. So she can't take the money out whenever she wants without paying a penalty until she's at least 59 1/2 years old.
I hope this helps you understand what a SEP IRA is all about!