In general, which of the following statements regarding self-employed retirement accounts is true?
A) In general, SEP IRAs have higher contribution limits than individual 401(k)s if the contributing taxpayer is at least 50 years of age at year end.
B) In general, SEP IRAs have higher contribution limits than individual 401(k)s no matter the age of the contributing taxpayer.
C) In general, Individual 401(k)s have higher contribution limits than SEP IRAs.
D) None of the choices are true. In general, both SEP IRAs and individual 401(k)s have exactly the same annual contribution limits.

Question

Quizplus · Accepted Answer

In general, Individual 401(k)s have higher contribution limits than SEP IRAs. While both types of accounts have contribution limits based on a percentage of self-employment income, the individual 401(k) allows for both employee and employer contributions, whereas the SEP IRA only allows for employer contributions. This means that an individual with a solo 401(k) plan can contribute more than someone with a SEP IRA. However, contribution limits for both types of accounts may vary based on factors such as age and income.

In General, Which of the Following Statements Regarding Self-Employed Retirement