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“Look into requirements for opening a SEP IRA” is listed as one of my goals for this year. That’s a pretty simple goal since it doesn’t require me to actually DO anything beyond check it out, but I have to start somewhere. So here we go:

As with anything else tax-related, I first checked out the IRS web site. They really have a huge amount of useful information there, if you’re patient enough to find exactly what you’re searching for.

In this case, I learned that “A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions.”

Basically it’s just a special kind of IRA that you can have if you are a business owner. Sounds like it would work for me so far. I decided to delve into Publication 560, which has significantly more detail.

There I immediately discovered a great reason to set up a SEP-IRA: The maximum contribution (for 2008 at least) is the “smaller of $46,000 or 25% of participant’s compensation.”

If I were to start making a lot more than I am now in my business, this would definitely be beneficial. But how would it affect my ability to contribute to a Roth IRA?

The publication says that, “A SEP-IRA cannot be a Roth IRA. Employer contributions will not affect the amount an individual can contribute to a Roth or traditional IRA.”

That also sounds promising, so I will be adding this to my list of things to consider when my business gets going a little more. Meanwhile, if you have any experience with a SEP-IRA, I’d love to hear about it.