Magazine

You’re the Boss of You. So Where’s Your SEP IRA?

By Sallie Krawcheck

Updated for the 2022 tax year.


So, you’re your own boss — you’ve gone from being an employee to being self-employed. You’re hard at work being a go-getter and growing your business.

And your retirement planning? That needs to get to work, too.

Since you can no longer sock money into that 401(k), it’s time to set up your own retirement account. And time is money: Every day that goes by without investing may cost you. So even as you’re setting up your own business, you should consider putting money aside as soon as you possibly can.

The good news? Freelancers and small business owners have an option tailor-made for their “I’m the boss of me” lifestyles: the SEP IRA. And if you open an SEP IRA or transfer an existing one to Ellevest, you’ll get help figuring out what you can do with your money so your retirement can be the best OOO ever.

Since you can no longer sock money into that 401(k), it’s time to set up your own retirement account.

The 411 on SEP IRAs

Short for Simplified Employee Pension IRA, a SEP IRA works in a similar way to a traditional IRA. It’s a tax-deferred account, so any investment earnings grow tax-free until you withdraw your money, and your contributions are tax-deductible.

And boy, those contributions. With a SEP IRA, you can contribute 25% of your earnings, up to a maximum of $61,000 annually for the 2022 tax year. Compare that to the annual $6,000 contribution limit on traditional IRAs, and it’s crystal-clear why SEP IRAs are kind of a big deal. Even 401(k)s can’t touch SEP IRAs here — they have an $20,500 contribution limit (not including employer contributions).

Bonus: You can contribute to a SEP IRA while still contributing the annual maximum to a traditional IRA, Roth IRA, or an employer-sponsored plan through a second job. If you want to open a traditional or Roth IRA in addition to your SEP IRA, you can do that too.

Set Up Your SEP IRA

Ellevest Plus and Executive members can open a SEP IRA with Ellevest using our retirement investing goal. So what sets an Ellevest SEP IRA apart from the other SEP IRAs out there?

For starters, we approach retirement differently. We give you an estimated goal amount — in dollars — for how much you might want for each year that you’re retired. It’s basically an annual budget, and we think it’s more useful than the lump sum forecasts you may get elsewhere. (Because after you get that lump sum, you still have to calculate how much you can spend each year, and that’s … work.)

When you open (or transfer) a SEP IRA with Ellevest, you’ll get that goal amount, along with a personalized investment portfolio that’s built to help you reach your goal.

Right now, we’re only able to open SEP IRAs for single-employee sole proprietorships (meaning that you’re the only employee at your company). But if you already have a SEP IRA — whether or not you’re a single-employee sole proprietor — you can transfer it to us in just a few steps.

And then you can go back to crushing it.

Disclosures

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

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Sallie Krawcheck

Sallie Krawcheck is the Co-Founder & CEO of Ellevest. Her life’s mission is to help women to reach their financial and professional goals.