Question

small-business retirement plans
abdoulaye is a 30-year-old small-business owner with an annual income of $120,000. they have no employees and want a retirement plan that allows flexible contributions based on annual profits, as well as tax-deductible contributions.

plan type	contribution limit	flexibility	employer requirement
roth ira	$7,000 per year	low	none
sep ira	$30,000 per year	high	employer contributions
simple ira	$15,000 per year	moderate	matching contributions

which retirement plan best meets abdoulaye’s needs based on their income and desire for flexibility?

• traditional ira; $7,000 per year
• roth ira; $7,000 per year
• simple ira; $15,000 per year
• sep ira; $30,000 per year

Explanation:

Step1: Analyze Needs

Abdoulaye wants flexible contributions (based on profits) and tax - deductible contributions, no employees.

Step2: Evaluate Plans

• Traditional IRA: Flexibility low, limit $7k.
• Roth IRA: Flexibility low, limit $7k (non - tax - deductible contributions).
• SIMPLE IRA: Moderate flexibility, matching req (has no employees).
• SEP IRA: High flexibility (matches profit - based), limit $30k, no employee req (since he has none), tax - deductible.

Answer:

SEP IRA; $30,000 per year