SEP IRA
Less admin, more flexibility. As the business owner—even just a side gig—you can fund the account with tax-deductible contributions based on you and your employees' needs.
Who is eligible for a SEP IRA?
Many types of businesses can establish a SEP IRA plan, but it's best suited for self-employed individuals and small businesses with no employees or many employees. With these plans, small business owners can contribute toward their employees' retirement, as well as their own retirement savings.
What are the benefits of a SEP IRA?
Every Schwab account comes with one-on-one investment help and guidance. With this account, employers also get:
- Tax-deductible contributions that vest immediately
- Tax-deferred earnings
- Flexible annual contributions
- High contributions for business owners
- A way to contribute to eligible employees' accounts
- 24/7 service and support
Get Started - Employers
Establish your SEP IRA as an employer.
Complete the required forms to establish your plan and account.
Here are all the documents you'll need to set up your plan depending on if you have no employees or many employees.
Employers with no employees can open their plan by mail or online:
To enroll by mail, complete the forms listed above and return them to Schwab.
To enroll online, upload your completed and signed Employer's Agreement and Adoption Agreement.
Get Started - Employees
Enroll in your SEP IRA as an employee.
You have the option to open your account online or by mailing in an application if your employer has:
- Already established a Schwab SEP IRA retirement savings plan to help you meet your retirement goals
- Advised that you are eligible to participate
To enroll and set up your account online:
- Review the completed Employee Summary (if provided by your employer) and the Employee Information Sheet
- Obtain your employer's SEP account number
- Provide the name of your employer's business that set up the SEP IRA
Common questions
If you have a specific question that's not answered here, please call us at 800-435-4000.
Employers may contribute up to 25% of each eligible employee's income, but no more than $70,000 per person for 2025 (or $69,000 if the contribution is for 2024). Maximum compensation that may be considered for the 25% limit in 2025 is $350,000.
The business owner has complete flexibility in contributions, as long as each employee (including the owner) receiving a contribution meets the plan eligibility requirements in the Adoption Agreement. Employers can change the percentage contributed every year, skip years entirely, and even contribute one year and then never again. Use our Contribution and Eligibility Calculator to model contributions to both business owners and employees, if applicable.
You can also use the Contribution Transmittal Form to record contributions to your participant accounts, including the business owner's.
Rollover or transfer rules for a SEP IRA plan are the same as traditional IRA plans. That means you can roll over funds to a traditional IRA or any qualified retirement plan, such as a 401(k).
A SEP IRA can be opened and contributions made until the employer's actual tax-filing deadline, including any extensions.
A SEP IRA is funded with employer contributions only. It does not need to be funded annually, but if you have employees and contribute for yourself, you must contribute for all eligible employees, including those who have terminated employment during the year. Full vesting is immediate.
Employee eligibility—special information for business owners with employees:
- Each employee must be included in the plan if they are an individual (including the employer) who:
- Has reached age 21
- Has worked a minimum of three of the previous five years
- And earned at least $750 in the year they are making the contribution for (either 2024 or 2025)
- An employer can also exclude union employees subject to a collective bargaining agreement, as well as non-resident aliens.
- An employer can use less restrictive participation requirements than those listed above but not more restrictive ones. The employer must also meet all the eligibility requirements listed in the SEP Adoption Agreement.
Use our Contribution and Eligibility Calculator to model which employees may be eligible, as well as contributions to both business owner(s) and employees, if applicable.
Plans must be established by the tax filing deadline of the business (generally April 15, plus extensions) in order to contribute for that tax year. This is also the deadline for annual contributions.
SEP IRAs are easy to set up and maintain, and no tax filing is required. Schwab reports all contributions and end-of-year fair market value on Form 5498 by May 31 each year.
You can start making penalty-free withdrawals from your SEP IRA plan after age 59½. If you do not start Required Minimum Distribution (RMD) withdrawals by age 73, you may be subject to pay a penalty.
The new SECURE 2.0 reduces the 50% penalty for missing an RMD effective for RMDs in 2023; it does not impact missed RMDs in 2022. Under SECURE 2.0, if you don't take your RMD by the IRS deadline, a 25% excise tax on insufficient or late RMD withdrawals applies. If the RMD is corrected timely, the penalty can be reduced to 10%. Follow the IRS guidelines and consult your tax advisor.
There are certain exceptions for which you can withdraw funds before age 59½ without taking a 10% penalty, including a rollover to another IRA, some higher education expenses, qualified first-time home purchase expenses, death, disability, and certain medical expenses; however, income taxes may still be due.