Self-employed, or SEP 401K, is a termfor the individual 401K, one of the newer retirement plans provided for the specific needs of the self-employed or small company owner. For people who qualify, the SEP 401K authorizes very generous contributions, which can translate into larger tax deductions and less taxable income. Depending on how the program is set-up, it can also allow for tax-free loans. The loans must be repaid in compliance with the loan amortization schedule to avoid a default resulting in taxes and IRS penalties. Self-employed people and business owners with no employees other than a spouse are eligible to establish the plan for their business . Also qualifying for the Sep 401K are sole proprietorships, partnerships and Subchapter S and C corporations. Like many 401K plans, the disbursements on a Sep 401K can begin at age 59 ½ years old and must start no later than age 70 ½. Taking withdrawals early will trigger taxes and incur a 10% penalty tax. The SEP 401K plan has provisions for generous contributions with higher limits, as well as profit-sharing contributions, and also allows additional contribution raises for individuals over the age of 50 to “catch up” on their nest-egg savings.  The government recognized that there was no favorable retirement plan for the self-employed, and in fact only a small percentage of self-employed people have a retirement plan in place . The Economic Growth and Tax Relief Reconciliation Act of 2001 went into effect on January 1, 2002, creating the SEP 401K by virtue of changing the rules on existing 401K plans. The idea was to make available a low-cost, easily administrated plan to encourage the self-employed to start saving for their retirement. The SEP 401K meets their needs and has become an increasingly popular choice for the sole proprietor. Check into the SEP 401K and accelerate preparing for your retirement.