By Doug Young

What is a SARSEP

Is your employer eligible for a SARSEP (Salary Reduction Simplified Employee Pension Plan), and does your employer offer a wage deferral SEP (Simplified Employee Pension)?

These programs are less common than most employer funded, tax advantaged retirement programs. Therefore, it is often hard for people who take part in SARSEP programs to locate helpful details about the options open to them.

If you wish to use precious metals to protect your retirement savings, or are considering how silver and gold investments may benefit your retirement funds, you are in the correct place.

Here I will examine what an SARSEP plan is, how it compares and differs from other retirement programs, how precious metal investments work, and how your retirement assets can be safeguarded against currency and stock market collapses.

What is a SARSEP Plan?

Lots of workers have not heard about SARSEP plans.

Starting the tax year and coming into effect on 1st January 1997, SARSEPs were no longer allowed to be set up in conjunction with SIMPLE IRA programs, although current SARSEPs were incorporated into the system and permitted to stay unchanged.

Such changes were implemented in accordance with the 1996 Job Protection Act for Small Businesses.

SARSEPs are retirement vehicles that were only offered to small companies with twenty-five staff members or less. With SARSEPs, staff members have specific SEP IRAs set up in their name, and the account owner and employer can contribute to them.

Contributions are made before tax, via wage reductions, and in 2023 contributions from employers cannot surpass either twenty-five percent of the staff member’s annual wage, or $66000 – whichever is smallest.

Contributions from staff members depend on wage reduction contracts outlined in the program. These contributions cannot surpass $22500 (in 2023). There is a catch up provision however which allows those aged  50 and over to contribute an additional $7500 (in 2023)

Furthermore, all contributions for self employed people are restricted by net income, which cannot surpass 25 percent in 2023.

Overall, SARSEPs are a selection of individual staff member accounts and SEP IRAs, operated in line with SEP IRA regulations.

Limitations and Rules for SARSEP Rollovers

The Inland Revenue Service (IRS) allows transfers or rollovers from SARSEPs (i.e. the specific SEP IRA inside an SARSEP) to be performed tax free, providing the cash is sent to a different certified account.

The sole condition is that each program (i.e. the receiving program and the SEP) has to permit account rollovers on retirement savings.

In the event that you wish to carry out a rollover on your SEP, you could opt to transfer the whole account balance, or just some of your account funds.

You can be fined for receiving cash distributions before you reach the age of 59½.

If you want to try a rollover, you should go for a direct rollover, rather than trying to do it indirectly. With indirect rollovers, you may be fined for breaking early distribution rules, due to the withholding demands.

How Can Gold Protect Your Retirement?


Kinds of Gold That SARSEPs Allow you to Purchase

Your investment options with SARSEPs are confined to your written employer contract, and what is offered to you by your SEP IRA custodian. By law though, your SARSEP IRA can provide the investment types listed below:

  • Options
  • Individual stocks
  • Mutual fund shares
  • Precious Metal
  • Individual corporate and government bonds
  • CDs
  • Real Estate
  • ETF shares

As far as tax advantaged investments go, SEP IRAs offer a fascinating selection of options. They permit every investment that a normal IRA permits (and have the same restrictions governed by your custodian). In addition, numerous SEPs also permit account holders to purchase commodities like precious metals.

In light of this, SARSEPs, via individual SEP IRAs, are a rare method of holding real precious metals in investment accounts.

Naturally, SEPs can purchase ‘paper gold’ by investing in gold mining firm stocks. Also, they can invest in mutual funds, which hold stocks from mining firms, or exchange traded funds that feature mining firms. These are ways of indirectly investing in precious metal.

Comparing ‘Paper Gold’ Investments With Physical Gold Investments

Firms that look for, mine, and produce gold ore provide ‘paper gold’ stocks. The biggest firms are shown on gold indices, such as the HUI and the GDX.

Types of Gold Investment

How To Include Physical Gold In Your Retirement Fund

There are may good reasons for investing in gold.

There are also good reasons for including physical gold as part of your retirement investment portfolio:

  • In times of economic uncertainty, stock market crashes or volatility, US Dollar weakness and rising inflation the price of gold usually rises. This is why it is referred to as a ‘hedge’. It is because of the inverse relationship that gold has with these aforementioned negative market conditions that its inclusion in your portfolio safeguards and protects it from the effects that such conditions can have.
  • History has proven that the price of gold will always go up over time. This will not necessarily be the case in the short term but it most likely will be in the longer term. That’s why you should consider gold as a long term investment. This makes gold a very good fit for retirement funds.

If you wish to add physical precious metals such as gold and silver to your retirement investment portfolio you will need to transfer or rollover your SARSEP to a Gold IRA.

There are many Gold IRA Companies who can assist you with this. It is best to choose a Gold IRA Company that has expertise in IRS regulations and retirement planning in general and well as expertise in precious metals.

If this is an avenue you are considering going down then you may want to check out my Reviews of the Leading Gold IRA Companies.

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About the Author: Doug Young
Doug YoungDoug is a highly experienced professional and widely trusted authority in financial investing, commodity trading, and precious metals. With over 20 years of expertise, he helps others make informed decisions by sharing a combination of personal experience, extensive knowledge and meticulously researched information on gold IRAs, precious metals investing and retirement planning. He regularly writes news items on these topics. He has considerable experience of evaluating Gold IRA and Precious Metals Companies, gained over a period spanning more than a decade.

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