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, Individual 401(k)s have higher contribution limits than SEP IRAs.
C) In general, SEP IRAs have higher contribution limits than individual 401(k)s no matter the age of the contributing taxpayer.
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. This is because an individual 401(k) allows for both employee and employer contributions, while a SEP IRA only allows for employer contributions. Additionally, the contribution limits for an individual 401(k) increase if the individual is age 50 or older, making it more advantageous for those closer to retirement age.

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