When you work for someone else, you can rely on the 401(k) or pension plan your employer provides to save for a comfortable retirement. But when you strike out on your own, you need to take care of everything yourself. That means setting money aside for your life beyond work, and one of the best ways to do that is with a SEP-IRA. A SEP-IRA allows you to set money aside on a tax-deferred basis, meaning you save money on current taxes while putting money aside for the future.
Decide which type of custodian you want to use for your SEP-IRA. A number of financial institutions provide SEP-IRA plans for their clients, including banks, brokerage firms and mutual fund companies. Deciding which custodian will work the best means looking at the investment options each one provides. A brokerage firm can give you access to individual stocks, while a mutual fund company allows you to invest in a wide array of funds and a bank gives you access to CDs and other guaranteed investments.
Choose the custodian you want to use for your SEP-IRA and call the company's customer service number. Ask for a retirement specialist when the customer service representative answers the phone. A retirement specialist will be able to help you determine which SEP-IRA is best for you, and how much of your income you can contribute to the plan.
Obtain an application for the SEP-IRA and fill it out completely. Provide your name, address, Social Security number and contact information. If your business is incorporated, provide the business name and employer identification number as well. If you operate as a sole proprietorship, you can use your personal Social Security number to open the account.
Submit the completed application, along with your SEP-IRA contribution for the tax year, to the address listed on the form. Keep copies of your application, and your purchase confirmation when you receive it, with your tax records. You need this information to record your contribution and get the tax break you have coming.
- Jupiterimages/Photos.com/Getty Images