What Is a Money Market SEP Account?

An SEP is a simplified employee pension established by employers to contribute tax-advantaged money for the retirement of their workers. Money market funds are one option for how the money is invested.

Function

An SEP allows the contributions to be made with pretax dollars, and earnings are not taxed while the money remains in the account.

Features

Money market mutual funds invest in debt instruments such as state, local and federal government bonds. These investments are strictly regulated by the Securities and Exchange Commission, so they almost never lose money.

Benefits

By investing money in an SEP money market account, your money will grow faster because the account is tax-deferred.

Considerations

Money market accounts, while safe, tend to offer lower rates of return than other more risky options like stock or bond mutual funds.

Warning

You cannot withdraw money from your SEP IRA until you reach age 59 1/2 unless you pay a 10 percent penalty on top of any taxes.

References

• IRS: Retirement Plan FAQs Regarding SEPs
• Investopedia: Money Market Mutual Funds