And with SEP contributions not due until April 15 for the previous tax year, companies gain an additional business management option. All earnings are tax-deferred until withdrawn. Here the tremendous power of compounding comes into play. Even assuming modest rates of return on annual contributions, SEP compounding can, after only a few years, deliver assets well above what would have accumulated had the money been paid in salary with taxes taken out along the way. With these funds withdrawn and taxed at retirement, when many persons are in a lower tax bracket, SEP participants gain all the more.
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