As a self-employed individual, tax planning and saving for retirement can often take a back seat amidst the hustle of managing your business. However, it’s crucial to remember that it’s never too late to start. For 2023, the Simplified Employee Pension (SEP) IRA remains an excellent option for self-employed individuals. Here’s why you should consider it and how you can still take advantage of this opportunity. 

What is a SEP IRA? A SEP IRA is a type of retirement plan specifically designed for self-employed individuals and small business owners. It offers a flexible and straightforward way to save for retirement. Unlike traditional retirement plans, SEP IRAs are easy to set up and maintain, with minimal paperwork, typically no setup fees, and no IRS filings. 

Eligibility and Contributions: Whether you’re a sole proprietor or single-member LLC, a partner in a partnership, or a member of an S-Corporation, you’re eligible to set up a SEP IRA. One of the primary advantages of a SEP IRA is the higher contribution limit compared to traditional IRAs or Roth IRAs. You also technically have until your tax filing deadline (including extensions) to fund your contribution! This means you could set aside the necessary funds until as late as October of 2024, while still having the contribution apply to your 2023 tax return!

For 2023, you can contribute up to 25% of your net earnings from self-employment, with a pre-tax maximum contribution limit of $66,000. This high ceiling provides a significant opportunity to lower your income tax burden and save for retirement, especially if you’re looking to catch up. 

Deadlines for 2023: It’s important to note that it’s not too late to contribute for the 2023 tax year. You have until your tax filing deadline (including extensions) to establish and fund your SEP IRA. For most self-employed individuals, this means you can make contributions until April 15, 2024, or October 15, 2024, if you file for an extension. 

Tax Advantages: Contributions to a SEP IRA are tax-deductible, meaning they can reduce your taxable income for the year. The savings grow tax-deferred, which means you won’t pay taxes on the earnings until you make withdrawals in retirement. 

How to Set Up a SEP IRA: Setting up a SEP IRA is straightforward. At Caveness Investment Advisory, LLC we can typically open a SEP IRA within 3-5 business days. 

Conclusion: As a self-employed individual, investing in your future is crucial, and a SEP IRA offers a flexible and lucrative way to do so. Remember, it’s not too late to contribute for 2023. By acting now, you can impact your financial security in retirement. Lastly, if you’re interested in exploring other tax saving and investment opportunities, then please don’t hesitate to reach out! At Caveness Investment Advisory, LLC we specialize in self-employed financial strategies, and always offer complementary consultations.