Q

Am I eligible for a SEP IRA?

A

Let's find out!

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[s]’ 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.

More about
Retirement savings accounts
What's a Roth IRA? What's a traditional IRA? What's a SEP IRA?

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