The purpose of any IRA is to accumulate tax-deferred or tax-exempt wealth. With a self-directed IRA, you can go one step further. You invest in what you know best and can diversify your portfolio with alternative investments that you understand and control. Either type of IRA can help you increase your wealth.
Even with smaller dollars, there are assets that can be acquired in your self-directed IRA. Choose and contribute to the IRA that best suits your needs. The SEP IRA, short for simplified employee pension IRA, is a retirement account that you can open if you are self-employed or are an employer. So, for example, if you contributed 10% of the salary of all your employees, you wouldn't be able to contribute 20% of the salary to your personal SEP IRA or you would reduce your contribution to 10% or increase your employees to 20%.
According to the IRS, an SEP IRA allows any employer to open a retirement account and make contributions on behalf of eligible employees, even if you are self-employed and create an SEP IRA and contribute to it on your own. An SEP IRA has many benefits for small business owners, and a self-directed IRA gives you even more. If you already have a retirement account, your provider will likely limit you to specific investments and offers, but not to a self-directed IRA. However, with improvements in IRA plans over the years, it is now possible for small business owners to secure life after retirement with personalized financial products.
If you're self-employed, own a business, or earn self-employment income from services, you're eligible to open a SEP IRA account. If you're in a financial position to take advantage of an SEP (simplified employee pension), you'll be able to create your account even more quickly and have the money you need to buy alternative assets with your self-directed IRA. A self-directed SEP IRA gives you all the benefits of an SEP (tax-deferred savings, higher contribution limits, quick and easy setup, low maintenance fees), while allowing you to invest your retirement fund outside the traditional market. A self-directed SEP IRA is unique because it allows you to look beyond stocks and bonds and invest in alternative assets, such as real estate, precious metals, and more.
As with traditional IRAs, these two accounts don't allow you to withdraw money until you're 59 and a half years old, and early withdrawals are subject to income tax and a 10% IRS fine. The deadline for establishing and contributing to an SEP IRA is the deadline for the employer's tax return, including extensions (as opposed to the usual deadline of April 15). SEP IRAs are a great retirement plan option if you're self-employed or own a small business with fewer than 100 employees.