SEP-IRA |
SIMPLE IRA |
Profit Sharing Plan |
Self-Employed 401(k) |
401(k) |
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Who it's for |
• Self-employed individuals or employers with few or no employees
• Employers who want flexibility in amount contributed from year to year |
• Small companies with 100 or fewer eligible employees
• Companies that want to allow employees to make salary deferrals and save tax-deferred for retirement |
• Self-employed individuals or businesses with few employees
• Businesses that may have variable profits
• Businesses that may want additional plan features |
• Self-employed individuals and business owners with no employees other than a spouse
• Those who want to make big contributions with flexibility in the amount contributed annually |
• Any type of public or private company
• Generally most appropriate for companies with 20 or more employees
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| Advantages |
• Easy to administer; low-cost
• No IRS reporting required
• No annual funding required
• Employer must contribute to eligible employee accounts in any year that the plan is funded |
• Easy to administer
• No IRS reporting required
• Largely funded by employee contributions, but limited employer contribution required |
• Discretionary contributions may be made
• Requires more setup and administration than certain other plans
• Additional features available, such as vesting or waiting periods for participation |
• Offers similar benefits of Traditional 401(k) with less administration required
• May permit greater contributions than SEP-IRA or profit sharing plan without the funding commitment required by a Personal Defined Benefit Plan |
• Flexibility in plan design
• Plan administrative services, investment management, and participant education programs
• Full range of mutual fund options |
| Maximum Contribution for 2007 |
| • Up to 25% of compensation (20% if you’re self-employed*) or $45,000 for tax year 2007 (whichever is less) |
• Employee: Up to 100% of compensation or $10,500 (whichever is less) for tax year 2007. Individuals age 50 and over may make a catch-up contribution of $2,500 for 2007
• Employer: Can match employee contributions dollar for dollar up to 3% (maximum of $10,000) or contribute 2% |
• Up to 25% of compensation (20% if you’re self-employed*) or $45,000 for tax year 2007 (whichever is less) |
• Up to 20% of self-employment income, plus additional $15,500 for 2007 salary deferral contribution for a combined total of $50,000 for tax year 2007
• Individuals age 50 or more may make an additional catch-up contribution of $5,000 for tax year 2007 |
• Employers may make a matching contribution or profit sharing contribution - up to 25% of compensation up to a maximum of $45,000 for 2007
• Total employer/employee contributions cannot exceed $45,000 ($50,000 if age 50 or older) |
