Opening and Funding My SEP IRA CD with Ally Bank

I opened an SEP IRA CD with Ally Bank last week in order to reduce my tax liability and invest in my retirement.

Ally Bank SEP IRAs are as easy to open online as any other type of Ally account, so I was able to open my SEP IRA in a matter of minutes.

Ally Bank offers 3 options for SEP IRAs including the IRA High Yield CD, IRA Raise Your Rate CD, and IRA Online Savings account.

I chose to open a 5-year IRA High Yield CD, because it provides a relatively higher APY without too long of a commitment, just in case interest rates rise significantly in the next 5 years.

The Ally IRA CDs are FDIC-insured and relatively safe investments, unlike the TD Ameritrade SEP IRAs, which allow you to actively invest your funds toward potentially higher earnings, but with more risk involved.

Since my main goal was to reduce my current tax liability, because SEP IRAs provide tax-deferred growth like a Traditional IRA, and since I’m not exactly an active trader or savvy investor, the Ally SEP IRA CD option seemed to be the best choice for me.

How To Fund Your Ally Bank SEP IRA

For SEP IRAs, an employer can contribute up to 25% of an employee’s compensation, with a maximum of $50,000 in 2012 and $51,000 in 2013. If you are self-employed, the limit is 20%.

Ally Bank requires that you submit the Ally IRA Contribution Form for any deposits to your IRA.

So even if you are transferring funds from another Ally account, you must still submit the contribution form by mail, as you cannot simply set up an online contribution, unlike how my Discover Bank IRA allows me to make online contributions.

If this is your initial contribution to your Ally SEP IRA, then you must also include a copy of the IRS Form 5305-SEP provided by your employer (or completed by yourself if self-employed).

I actually was a little confused by the 5305-SEP form, as I am making my contributions as a self-employed individual, and not getting contributions from my employer.

However, I confirmed with Ally Bank that even self-employed individuals must submit form 5305-SEP with your initial contribution to your Ally Bank SEP IRA, and you just need to complete the 5305-SEP form as an employer would, because Ally Bank needs to establish that you are actually contributing funds from your self-employment income.

I submitted the contribution form, form 5305-SEP, and a check by mail, and my contribution was posted to my account within 3 business days, so I didn’t have any problems.

This is actually my first Ally Bank Account, and overall, it has been a hassle-free experience to open and fund my new SEP IRA CD.

I certainly wish I could be earning a higher interest rate on my contributions, but since my main goal was to reduce my current tax liability, I am happy with my account and looking forward to banking with Ally.

Do you have an SEP IRA with Ally Bank or another institution? Please feel free to share your experiences and/or ideas about how to maximize your SEP IRA contributions.

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