Benefits of SEP-IRAs?

I know that there is already a thread about making IRA contributions, but I thought I’d start this one because it is specifically about SEP-IRAs. Mods, my apologies if this is in the wrong place; please feel free to merge if needed.

I will be able to invest some money in a SEP-IRA this year (I am already maxing out my Roth IRA contribution). I would like to do this, but I am getting some conflicting advice about doing so.

Some have mentioned that a major drawback is that the money in a SEP-IRA only is only tax-deferred (like a traditional IRA). I will have to pay taxes on it when I take it out (at age 59 or so?) Therefore, these people have told me that there is no real benefit in starting a SEP plan; I would be better off taking that money and investing/using it now.

Does anyone have any thoughts on this? One possible benefit that I could think of is that if the money is in a SEP-IRA it is growing and compounding without tax being taken out, so you might end up with more money in the end because of this.

Thanks. The Roth IRA is the best deal, but I’d like to make use of the SEP if there are some benefits.

Not just might end up with more money, but you will end up with more money. Unless of course, you buy and hold until the time you retire without selling anything. I think you got the idea of what the advantages are. That, and it would force you to save it for retirement instead of spending it in the meantime.

Thanks, scomaro. You reconfirmed what I had been thinking.

Just another thought to throw out there. How about putting money in a SEP-IRA and then in the future converting it to a Roth IRA? I’ve noticed that it is still possible to convert traditional IRAs over to Roths, so I thought it might be possible for a SEP.

I am going to continue to do some research on this. The Roth sure is the best deal out there–and the contributions are set to go up in the years to come!

Thanks again, scomargo.

You’re welcome, although I didn’t really help you that much.

I don’t know anything about the SEP IRA --> Roth conversion, so I can’t help you there.

I’m assuming you own your own business or are self-employed, right? I doubt that I would qualify for an SEP IRA with my office job that I got now. For that reason, I’ve never really looked into the SEP IRA in any detail. Let me know if you think I would still qualify.