If you're a small business owner or sole proprietor, you may be one who manages it all: sales, marketing, customer service, billing, and quality control. Planning for retirement can get lost in the shuffle.
Opening a SEP-IRAis a simple option for the self-employed and small business owner to start building a secure financial future. A SEP (Simplified Employee Pension) IRA offers high annual contribution limits, and getting started requires minimal paperwork. For the time-pressed, this can be an easy option for small businesses with or without employees.
Are You a Sole Proprietor, Independent Contractor, or Freelancer?
ASEP-IRAcan give you the flexibility to increase or decrease contributions according to fluctuating income levels.
You may contribute annually the lesser of 25% of compensation or 20% of net earnings from self- employment or $72,000 for yourself and each eligible employee for 2026 up to your tax-filing deadline, including extensions. Therefore, that maximum compensation that can be considered for SEP IRA in 2025 is $360,000.
Your contributions are tax-deductible.
Just like traditional IRAs, SEP-IRAs are federal tax-deferred; meaning dividends and capital gains are shielded from federal taxes until funds are withdrawn.
Are You a Small Business Owner?
A SEP-IRA may also be a good option for those businesses with up to 100 employees.
You, as the employer, are not locked into contributing each year, and you can decide whether and how much to contribute to employees' accounts. But, as an employer, you must contribute for all eligible employees at the same percentage of compensation for each.
SEP-IRAs offer a streamlined administration plan, meaning there are no plan tax filings with the IRS.
Small Business Owner Retirement Plan Options
What If You Already Have a Traditional IRA or Roth IRA?
You can participate in a SEP-IRA plan even if you already contribute savings to a Traditional IRA or Roth IRA. Keep these points in mind:
Participating in a SEP-IRA means that you are covered by a retirement plan at work. This can impact how much can be deducted from a Traditional IRA. The amount of a Traditional IRA contribution that is deductible depends on your modified AGI for the year.
Eligibility for Roth IRAsis also based on modified AGI for the year.
Self-employed persons can lower their AGI by funding a SEP-IRA. Thus it may be possible to lower AGI enough to be eligible for Roth IRAs or deductible Traditional IRAs.
Self-employed persons can potentially contribute to a Traditional IRA and/or Roth IRA and/or SEP-IRA for the year. This provides flexibility when deciding how much to contribute to each type of retirement plan.
The SEP-IRA Contribution Deadline
It does give you some flexibility, but don't wait too long. A new account must be opened prior to your tax return due date, which, for individuals, is generally April 15th 2026. If you file an extension with the IRS, you may be able to make a contribution or open a new account as late as October 15th 2026.
Taking a Closer Look at SEP-IRA Due Dates
