need advice on SEP

[rigz]

hello...just found this forum and hope to get some good advice.

my question is on opening a SEP. obviously i am self employed and my cpa says that if I don't open a SEP I will owe about 22k in taxes.

however if I max out the SEP for ~13k then my tax bill will be reduced to about ~14k.

is it a good idea to max out the SEP to reduce my tax hit from 22k to 14k?

[jpg7n16]

That depends. What are your goals?

SEP money should be designated for retirement. Is this money you will not need access to until you retire? Or money you were planning on using for debt repayment? Home purchase? College tuition?

If it's money for retirement, I see no problem stashing it away. But if you need it available sooner than that - the SEP is counterproductive.

[rigz]

That depends. What are your goals?

SEP money should be designated for retirement. Is this money you will not need access to until you retire? Or money you were planning on using for debt repayment? Home purchase? College tuition?

If it's money for retirement, I see no problem stashing it away. But if you need it available sooner than that - the SEP is counterproductive.

it would be pretty much for retirement. i dont have any debt and i have my home purchase fund seperate. no kids (yet) for college savings.


i just wonder if financially it makes sense to max it out to save about 8k on my taxes.

[jpg7n16]

Ok, is this money you currently have liquid in the bank? Would you still have a cash buffer?

It's more just a deferring of your taxes. You would postpone them, not pay today at today's rates - invest, let it grow, then be taxes on withdraw at tomorrow's rates.


But if you're somehow able to save $9k on taxes by contributing $13k - that seems like a very good idea. As long as you don't need the cash liquid, I don't see any problem with this idea.

[AshleyB]

Seems great to me, if you can afford the extra $5,000 now.

[MrPolarZero]

From the looks of it, I think it is alright for you to max out on this one. However, you might want to check first to see if there would be penalties imposed on you later on.