What are the advantages of a SEP for an employee?
A simplified employee pension (SEP) plan offers several advantages to employees. First, all of the contributions are made by the employer at the same percentage rate for all employees from the chief executive on down, although the contribution can shrink if the business hits hard times. Second, money contributed to the SEP will grow tax-free inside the account until it is withdrawn. Over the years, this tax-advantaged growth can be substantial. In addition, SEPs can offer a range of investment options. And unlike many other types of retirement programs, all the money that is contributed to a SEP immediately belongs to the employee. No gradual “vesting” period is allowed.
