← Back to Tax Planning

SEP IRA

A simplified retirement plan allowing business owners to contribute up to 25% of net self-employment income (up to $70,000 for 2025) with minimal administrative requirements.

Vehicle Source: Billionaire Wealth Strategies Verified: 2026-04-07

Definition

A SEP IRA (Simplified Employee Pension Individual Retirement Account) allows business owners to make tax-deductible contributions of up to 25% of net self-employment income, with a maximum of $70,000 for 2025. It is the simplest retirement plan for self-employed entrepreneurs, requiring minimal administrative overhead.

How It Works

The employer (the business) makes contributions directly to the SEP IRA on behalf of the owner and any eligible employees. Contributions are tax-deductible to the business and tax-deferred to the recipient. There are no annual filing requirements (unlike 401(k) plans), and the contribution amount can vary year to year.

If the business has employees, contributions must be made at the same percentage for all eligible employees (those who are 21+, have worked for the employer in 3 of the last 5 years, and earned at least $750).

When Entrepreneurs Use This

Solo entrepreneurs or small businesses: Minimal paperwork and no annual filings
Variable income businesses: Contribution amounts are discretionary each year
Late-year tax planning: Can be established and funded up to the tax filing deadline (including extensions)
Stepping stone: Often used before transitioning to a Cash Balance Plan or solo 401(k) as income grows

Dew Wealth Perspective

The SEP IRA is a solid starting point, but most high-income entrepreneurs outgrow it quickly. At $500,000 or more in income, the Cash Balance Plan offers dramatically higher deferral limits. The Linchpin Partner evaluates which retirement vehicle maximizes deferral for each client's specific income level and employee structure.

Frequently Asked Questions

Can I also have a 401(k)?

Yes, but combined contributions to both plans cannot exceed IRS limits. A solo 401(k) often provides more flexibility than a SEP IRA for businesses without employees.

Can I make Roth contributions to a SEP IRA?

Starting in 2023 under SECURE 2.0, employers can offer Roth SEP IRA contributions. However, these are after-tax and do not provide a current deduction.

Disclosure

Certain portions of this publication may contain a discussion of potential benefits and results as of a specific prior date. Due to various factors, including changing market conditions and regulations, such discussion may no longer be reflective of current potential benefits and/or results. Please remember that past performance may not be indicative of future results. Different types of investments and strategies involve varying degrees of risk, and there can be no assurance that any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dew Wealth or any of its advisory representatives), or any non-investment-related services, will be suitable for your portfolio or individual situation, or prove successful.

The potential savings and benefits discussed represent typical results based on the experience of existing clients. Individual results can and will vary based upon a variety of factors, such as the client's investment and financial circumstances, tax bracket, current insurance policy terms and insurance needs, and overall objectives. Neither the scope nor nature of the firm's services should be construed as guarantees of a particular outcome. Dew Wealth Management, LLC ("Dew Wealth"), an SEC-registered investment adviser located in Scottsdale, Arizona, provides the Fractional Family Office services described herein. Registration is not an endorsement of the firm by securities regulators, nor is it an indication that the adviser has attained a particular level of skill or ability.

The content herein is intended to serve as informational material only and is intended exclusively for the use of the person named herein. If you are not the intended recipient, please refrain from further dissemination and return or destroy all copies of this material in your possession. This content is not representative of any particular client experience or outcome and is instead intended to provide general information regarding the potential time and money savings that could be experienced, based on various assumptions, inputs, and data sources. Among other things, the results of the calculators are derived from your inputs, and consequently, errors or omissions in entering your data into the calculator could result in materially inaccurate outputs. Dew Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party and included or relied upon herein and takes no responsibility for same. Client experiences and outcomes can and will vary from those reflected herein, and these informational outcomes should not be construed as a direct or indirect guarantee of similar future results.

Not all services will be necessary or appropriate for all clients, and the potential value and benefit of the adviser's services will vary based upon a variety of factors, such as the client's investment and financial circumstances, tax bracket, current insurance policy terms and insurance needs, and overall objectives. Clients are free to accept or reject any recommendations provided by the firm and may choose to implement accepted recommendations with the professional(s) of the client's choosing. The effectiveness and potential success of the adviser's services can depend on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client's other engaged professionals, and market conditions.

Dew Wealth Management, LLC ("Dew Wealth") is neither a law firm nor an accounting firm and does not provide legal or tax advice. Website visitors and clients should consult an attorney or tax professional regarding their specific legal or tax situation. Dew Wealth is not an insurance agency, but certain Dew Wealth representatives maintain insurance licenses in their individual capacities to allow for consultation on insurance needs and products. Neither Dew Wealth nor any individual insurance agent associated with Dew Wealth receives commission-based compensation for insurance sales. Past performance does not guarantee future results. All investing comes with risk, including the risk of loss.

By accessing, using, or receiving this Document, the Recipient acknowledges and agrees to be bound by the terms and conditions outlined at DewWealth.com/IP.