SEP IRA catchups
I’ve always understood catchup contributions could only be made by the employee for salary deferral type plans, such as 401(k), 403(b), 457(b) and SIMPLE IRAs.
But I just found the following from a Forbes article:
[i]1. SEP-IRA. If you’re a one-man or woman band, this account is a good bet. A simplified employee pension, or SEP IRA, is a basic way to set aside pretax savings. You can contribute as much as 25 percent of your net self-employment income, up to a maximum of $49,000 in 2010 (same for 2011). If you’re age 50 or over at the end of the calendar year, [b]you can also make catch-up contributions of $5,500 for 2010.[/b] This limit remains the same in 2011. A SEP-IRA, however, cannot be a Roth IRA.[/i]
http://finance.yahoo.com/focus-retirement/article/112522/best-retirement…
Is this correct?
BruceM
Permalink Submitted by Alan Spross on Wed, 2011-04-13 20:35
Here is what the IRS site shows:
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Can catch-up contributions be made to a SEP?
No. SEPs are funded by employer contributions only. However, catch-up contributions can be made to the IRAs that hold the SEP contributions if the SEP-IRA documents allow. The catch-up IRA contribution amount (for employees age 50 and older) is $1,000 for 2006 and later years.
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This was news to me, since Pub 560 does not mention catchup contributions.
A SARSEP is different for those still around. For them the catchup is the same as for a 401k (5,500).
To add to the mix, a TIRA contribution can be made to a SEP IRA account and therefore a typical TIRA catchup contribution.
So I guess you could still call Forbes on their error, because their figure is only good for SAR SEPs, and no way would they be writing about SAR SEPs now.
Permalink Submitted by BruceM on Wed, 2011-04-13 21:15
Alan…
Thanks…I thought I was losing it 😡
Yours is exactly what I was thinking.
BruceM