What type of IRA is considered a simplified and less expensive option for self-employed individuals?

A SEP-IRA, or Simplified Employee Pension Individual Retirement Arrangement, is specifically designed for self-employed individuals and small business owners. This type of retirement account allows for higher contribution limits compared to a traditional or Roth IRA, making it particularly advantageous for those who are self-employed and wish to save more for retirement.

The SEP-IRA is relatively easy to set up and maintain, requiring minimal paperwork, which contributes to its cost-effectiveness for employers. Contributions made to a SEP-IRA are tax-deductible, reducing taxable income for the contributor. Additionally, the simplicity in terms of administrative responsibilities makes it appealing for self-employed individuals who may not have the resources to handle complex retirement plans or higher administrative costs associated with other retirement accounts.

While other types of IRAs offer valuable benefits, such as the tax-free withdrawals of a Roth IRA or the upfront tax deductions of a traditional IRA, the SEP-IRA stands out as a streamlined option tailored for those with self-employed income, maximizing both ease of use and the potential for higher retirement savings.