Open SEP IRA Account – Single vs. Multiple?
A SEP IRA account is a simplified individual retirement account, but when you open this type of account should you choose a single account or set up multiple accounts instead? This is one of the more popular options for a lot of people because it is a simple IRA, and because of the benefits offered. In most cases having multiple accounts of this type does not really offer any additional benefits, because your maximum contribution limit will be the same each year whether the entire amount is put into a single account or is split up into multiple accounts instead. Many investors find that a single SEP IRA account makes it easier to track and manage account activity, without trying to manage many different accounts which can get confusing at times and cause mistakes to occur.
Self employed retirement plans are available in a number of types, and each type has a maximum amount which can be contributed annually. Instead of opening up a SEP IRA account and then creating another account of this same type you may be better off choosing another retirement plan instead. Some 401k plans may allow you to contribute more each year, so a single SEP and then other account types may be the best solution. In some cases a 401k rollover to IRA may make it more advantageous to open up a second account, but this will depend on the specific circumstances and situation.
A self directed Roth IRA can be more complex than a simplified employee pension plan, and may not always be the right choice for some self employed individuals/ One advantage that a SEP IRA account offers that many other plans and account types do not is that any contributions to a SEP IRA are made voluntarily, and do not need to be the same amount each year. If you do not have the resources to pay your usual contribution amount you can make a smaller contribution instead. As long as you do not exceed your annual maximum contribution amount across all of the retirement accounts then you may choose to contribute any amount each year, or nothing at all.