SEP-IRA

retirement

Also known as: SEP, SEP IRA, Simplified Employee Pension

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

SEP-IRAs are funded entirely by employer contributions (the self-employed person IS the employer). 2026 max contribution: lesser of 25% of "compensation" or $73,000. For self-employed: contribution = ~20% of net self-employment income (after deducting half of SE tax). Easy to set up (1-page form), no annual filing requirements (unlike Solo 401(k)). Funds are tax-deductible (reducing AGI), grow tax-deferred, and taxed as ordinary income at withdrawal. Often used by 1099 contractors, freelancers, sole proprietors, and small-business owners — particularly attractive when income exceeds 401(k) limits.

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