A SEP (Simplified Employee Pension) is a great retirement tool for individuals that have earned income that doesn’t come on a W-2.

If you are a sole practitioner, you may contribute up to 20% of your Schedule C income for the 2015 tax year, which for many individuals would be more than you could contribute to a 401k at a corporate employer. If you are an owner of a company that has more than one employee a SEP can become a bit more complicated because of required funding of your employees. See the IRS calculation here: IRS Self Employed SEP calculation What is great about the SEP is that it is easy as filling out one tax form and then opening up a new SEP investment account. Dollars invested grow tax deferred and you receive a deduction on your taxes, much like a 401k or deductible IRA.

How much could you save?

If you use TurboTax to do your taxes, enter “SEP account” in the search box; this should pop up as an option to jump to the SEP section under Business Income and Expenses. Enter in a hypothetical SEP investment, and TurboTax will show you how much you could potentially save. If you use a tax preparer, ask them about how a SEP could save you taxes that are due.

A SEP is one of the many plans we use to build personalized investment portfolios for our clients. You may learn about our investment philosophy here.

Please reach out to us if we can help you understand your SEP options, or any retirement options (401ks, IRAs, etc) for that matter.