Tax-advantaged accounts are any financial accounts that are exempt from taxes, tax-deferred, or qualify for other tax benefits. Since these reduce the amount of taxes your business pays, it’s wise to take full advantage of them and invest your money. Maxing out these accounts can benefit you now and in the future.

SEP-IRA

A Simplified Employee Pension (SEP) Plan is a retirement savings account that an employer establishes for both their employees and themselves. This is a very flexible type of account. The contribution limits are much higher than traditional IRA accounts, which allows you and your employees to save much more money. 

Any contributions you make to your account and your employees’ accounts are tax-deductible. You can also pair a SEP-IRA with a traditional IRA or a Roth IRA. This means you put away even more savings. With a SEP-IRA, you don’t need to commit to contributing each year.

Roth IRA

A Roth IRA is an individual retirement account that is a beneficial way for you to grow your money. When in a Roth IRA, your money can grow tax-free. Since you are contributing after-tax dollars, you can withdraw the money at any time without penalty or tax. With a Roth IRA, you also have a choice for how your money is invested. It can be placed in stocks, bonds, mutual funds, etc. and you can choose what risks you want to take. 

There’s no minimum distribution required, you can contribute at any age, and you can withdraw your money tax-free in retirement. Additionally, you can contribute more money when you file jointly with a spouse. Joint filing taxpayers can contribute the maximum to a Roth IRA up to a MAGI of $218,000.

Simple IRA

As a business owner, you are responsible for providing retirement plans for your employees. Many plans can be expensive to manage. If you have a small business with less than 100 employees, a simple IRA is a great option. This plan is easy to set up, has fewer restrictions, and allows for more contributions. They’re funded by both the employer and the employee, but they are individually managed by employees. A simple IRA is a flexible account that doesn’t require yearly contributions. They’re easy-to-manage accounts that reduce your cost and effort to administer. 

Maxing out these accounts in 2023 will allow you to take full advantage of the tax benefits. You can put aside more money for retirement and save money on what you pay on taxes. You can use one of these accounts or you can have several in order to maximize savings. 

Did you enjoy this article? Here’s more to read: How to Master Your Finances as an Entrepreneur