What type of account is specifically designed for self-employed individuals and small businesses?

The SEP IRA, or Simplified Employee Pension Individual Retirement Account, is specifically designed for self-employed individuals and small businesses. This type of retirement plan allows employers, including sole proprietors, to make tax-deductible contributions for themselves and their employees, making it an attractive option for those who may not have access to more traditional employer-sponsored retirement plans. The contribution limits are higher compared to other individual retirement accounts, which encourages more significant savings for retirement.

This account is particularly beneficial for self-employed people because it offers flexibility and simplicity in administering the plan. Unlike other retirement accounts, such as the 403(b), Roth IRA, or Traditional IRA, which cater to different groups or have different contribution structures, the SEP IRA is tailored to meet the needs of individuals and small businesses, facilitating a straightforward way to save for retirement while reducing taxable income in the process.