The SEP IRA is one of the most powerful retirement tools available to self-employed individuals — and one of the most underused. If you’re a freelancer, consultant, or solo business owner, you could be sheltering up to $69,000 from taxes in 2024 with one account. We’ve done the research on which brokerage offers the best experience for opening and managing one. See our Self-Employed Money Guide for more tax and retirement strategies for the self-employed.
What Is a SEP IRA?
A SEP (Simplified Employee Pension) IRA is a retirement account designed for self-employed individuals and small business owners. Unlike a traditional IRA with a $7,000 annual limit, a SEP IRA allows contributions up to 25% of net self-employment income, with a maximum of $69,000 in 2024. Contributions are tax-deductible, and growth is tax-deferred until withdrawal in retirement.
SEP IRA vs. Other Self-Employment Retirement Accounts
| Account Type | 2024 Contribution Limit | Employee Contributions? | Roth Option? |
|---|---|---|---|
| SEP IRA | $69,000 | No (employer only) | No |
| Solo 401(k) | $69,000 | Yes ($23,000 employee) | Yes (Roth solo 401k) |
| SIMPLE IRA | $16,000 | Yes ($16,000) | No |
| Traditional IRA | $7,000 | Yes | No (separate Roth IRA) |
Best Brokerages for a SEP IRA
1. Fidelity — Best Overall
Fidelity offers SEP IRAs with no annual fees, no account minimums, and access to their full lineup including ZERO expense ratio index funds (FZROX, FZILX). The setup process is straightforward online. For self-employed individuals who want the most control over their investment choices — from stocks to bonds to international ETFs — Fidelity is our top pick.
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2. Vanguard — Best for Vanguard Fund Loyalists
Vanguard’s SEP IRA gives you access to their legendary low-cost index funds (VTSAX, VFIAX, etc.). There’s no fee for the account itself. The downside: Vanguard’s interface is dated, and customer service has struggled with wait times in recent years. If you’re purely a Vanguard fund investor, it works fine.
3. Charles Schwab — Best for Active Investors
Schwab offers a SEP IRA with no fees, extensive research tools, and access to a wide range of ETFs and individual securities. Their customer service is consistently rated as the best in the industry. Schwab also has a strong robo-advisor option (Schwab Intelligent Portfolios) if you want automation.
4. M1 Finance — Best for Automated Portfolios
M1 Finance supports SEP IRAs and their pie-based automation works well for self-employed investors who want to contribute and have the money automatically deployed to target allocations. The minimum for IRA accounts is $500. No management fees.
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How Much Can I Actually Contribute?
The SEP IRA contribution limit is 25% of net self-employment income (after deducting the self-employment tax deduction). Here’s a quick guide:
- $80,000 net income: Max contribution ≈ $14,842
- $150,000 net income: Max contribution ≈ $27,835
- $276,000+ net income: Max contribution = $69,000
In our research, many self-employed people underestimate their allowable contribution. Run the calculation in IRS Publication 560 or use your tax software — you may be leaving significant tax savings on the table.
When Must SEP IRA Contributions Be Made?
You have until the tax filing deadline (including extensions) to make SEP IRA contributions for the prior year. This means you can open and fund a SEP IRA as late as October 15, 2025, for the 2024 tax year, if you file for an extension.
Frequently Asked Questions
Can I have a SEP IRA and a Solo 401(k) at the same time?
You generally can’t contribute to both in the same year for the same business. However, if you have a side business, you could potentially have a SEP IRA through one business and a Solo 401(k) through another. Consult a tax advisor before setting this up.
Can I make Roth contributions to a SEP IRA?
No. SEP IRAs are traditional (pre-tax) only. If you want Roth benefits as a self-employed person, look at a Roth IRA (subject to income limits) or a Solo 401(k) with a Roth component.
Is there a vesting schedule for SEP IRA contributions?
No. SEP IRA contributions vest immediately, 100%. This is one advantage over some employer 401(k) plans with multi-year vesting schedules.
What happens to my SEP IRA if I hire employees?
If you hire employees who meet eligibility requirements, you must contribute the same percentage of their compensation to their SEP IRAs as you contribute for yourself. This is when many self-employed people consider switching to a Solo 401(k) or other structure.
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WealthIQ Editorial
This article was produced by the WealthIQ editorial team using AI-assisted research and drafting, with review for accuracy before publication. Sources include IRS.gov, SEC.gov, FDIC.gov, and Federal Reserve data. View our disclosure →