What is the maximum contribution limit for an individual participant in a SEP plan for 2020?

The maximum contribution limit for an individual participant in a Simplified Employee Pension (SEP) plan for the year 2020 is $57,000. This limit applies to the total contributions made by an employer on behalf of an eligible employee, which includes the employee's own contributions if they also serve as the employer.

This amount is subject to annual adjustments based on inflation, and the figure for 2020 was specifically set at $57,000, allowing for significant tax-deferred growth potential for retirement savings. SEP plans are often favored for their simplicity and flexibility in contribution amounts, but they have specific contribution limits that participants must adhere to, which are set by the IRS each year. In the context of retirement savings, understanding the contribution limits of different plans is crucial for effective financial planning.