My favorite type of retirement plan for sole proprietors

My favorite type of retirement plan for sole proprietors




Retirement savings accounts known as SEP IRAs have distinct advantages A simplified employee pension (SEP) IRA is a retirement savings plan established by employers—including self-employed people—for the benefit of their employees and themselves. Employers may make tax-deductible contributions on behalf of eligible employees to their SEP IRAs.



SEPs are something worth considering because they are easy to set up, have low administrative costs, and allow an employer to determine how much to contribute each year.



Our friends at the Internal Revenue Service have uncharacteristically said, “We are going to make this easy,” when it comes to opening SEP IRAs.



A SEP IRA is very easy to open. The IRS states that you must do three things:

  1. Execute a written agreement to provide benefits to all eligible employees.
  2. Give employees certain information about the agreement.
  3. Set up an IRA account for each employee.

A written agreement is typically executed by the brokerage firm for you when you open the account.



Assuming you have employees, you merely have to notify them that the plan has been established and how they might be covered.



Assuming you have employees, a SEP IRA account must be set up for each employee.



This is my favorite type of retirement plan for sole proprietors or those who might have no employees. If that is the case, there is virtually nothing to do except to write the check and take a tax deduction for contributing funds into an account for yourself and receiving a tax deduction for doing so.




Unlike most retirement plans, there are no annual filing requirements.
There is very little liability for the owner as each employee has their own account and is responsible for their investment decisions.



All recipients are 100% vested when contributions are made.



Are you interested in learning more about SEP IRAs and whether one might benefit you? One of our advisors would be happy to speak with you about your unique situation. We’ve built a great team of experienced financial advisors and attentive client service representatives to ensure you’re in good hands and on track to meet your goals.


Gene McManus, CPA, CFP

Partner, Advisor

[email protected]





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