Am I eligible for a SEP IRA?

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Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Though SEP IRAS are best known as the freelancer’s answer to a 401(k), identifying exactly who is eligible to open one is slightly more complicated.

Yes, anyone over 21 years old with freelance income can open one and contribute pre-tax income to them — and SEPs are a great way to both defer income tax and put a fortune towards retirement, owing to SEPs’ high annual limit (as of 2018, you can contribute 25% of your income, or $55,000, whichever number is smaller.)

But SEPs are also available to employers with at least one employee as a way for (mostly) small business owners to contribute to their employee’ retirement savings and investments. However, those who work for the SEP-opening business owner may not open a SEP of their own; the employer’s SEP contributions must be deposited into a traditional IRA opened in the employee’s name.

Last Updated December 8, 2017

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