3SEP IRA Investment Report
Objective: To illustrate the benefits of contributing to a SEP IRA over a three-year period, including potential tax savings and investment growth.
Scenario Summary: An investor contributing $69,000 annually to a SEP IRA over three years, invested in the S&P 500, could see significant tax savings while potentially growing the account to a substantial value. Here’s a detailed breakdown.
Contributions & Tax Savings
• Annual Contribution: $69,000
• Investment Period: 3 years
• Tax Savings Rate: 37% (assumed for highest tax bracket)
Each contribution reduces taxable income, creating immediate tax savings. Here’s how it breaks down annually:
Summary: Over three years, the investor contributes a total of $207,000. With tax savings of $76,590, the effective out-of-pocket cost of these contributions is reduced to $130,410.
Investment Growth in the S&P 500 Assuming an 8% annual growth rate in the S&P 500, the account value will increase each year, compounding the contributions. Here’s the projected growth:
Year Account Value (with 8% Growth)
1 $74,520
2 $155,782
3 $246,244
Summary: After three years, the SEP IRA is projected to grow to $246,244, thanks to consistent contributions and market growth. This means the investor’s contributions are not only tax-efficient but also positioned for potential substantial growth.
Key Takeaways
• Tax-Efficiency: By contributing to a SEP IRA, this investor saves 37% in taxes each year, leading to a cumulative tax savings of $76,590 over three years.
• Effective Cost Reduction: Due to tax savings, the true cost of contributions is reduced to $130,410, significantly enhancing the efficiency of the investment.
• Growth Potential: With an 8% annual return, the SEP IRA could reach a projected value of $246,244 in three years, maximizing retirement savings with a long-term growth strategy.
This strategy leverages the advantages of tax savings and the growth potential of the S&P 500, making it an effective choice for those seeking both immediate tax relief and long-term portfolio growth. Let us know if you'd like to discuss how this approach can be tailored to your financial goals.
11. Disclosure
Important Notice: Advisory services are offered through Sigma3Capital LLC an Investment Advisor in the State of CA. Sigma3Capital LLC and Long Nguyen are not affiliated with or endorsed by the Social Security Administration or any other government agency. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital. The information contained in this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
Thank you for considering this investment proposal. We are committed to supporting you in achieving your financial objectives and look forward to working closely with you on this journey.
