Self-Employment: Here’s What to Know About SEP-IRAs

Working for yourself has tremendous advantages for those with an entrepreneurial spirit. If that’s you, you may love being self-employed. What you may not love, though, is that your retirement savings isn’t as easily taken care of as it might be with an employer’s 401(k) plan. Many turn to an IRA when they start their own business or work as a contract employee, but what some don’t know is that there is actually an IRA specifically designed for self-employed individuals: SEP-IRAs. 

What is the advantage of an SEP-IRA?

SEP-IRAs offer generous options for retirement savings. These plans are designed for those who are self-employed or who have a small business with no employees. Similar to a traditional IRA, your earnings grow on a tax-deferred basis. In addition, it is possible that your contributions could be tax-deductible.

So, what makes SEP-IRAs so different from a traditional IRA? Notably, you have the potential to contribute more to your SEP-IRA than you could a traditional IRA. In short, a traditional IRA allows contributions up to $6,000 per year, unless you are 50 or older, in which case you can contribute $7,000. An SEP-IRA, however, allows contributions of 25% of your income for that year or $58,000 (for 2021), whichever is less. 

What are the disadvantages of an SEP-IRA?

Unlike a traditional IRA, SEP-IRAs do not allow for “catch-up” contributions for those 50 or over. In a traditional IRA, this would allow for an additional $1,000 per year for those who meet the age requirements. However, although that extra contribution isn’t available, the overall contribution limit for SEP-IRAs is higher than your average IRA. In addition, there is not an option to have a Roth SEP-IRA, so you don’t have the opportunity to pay taxes now to avoid paying them later. 

Small Business Owners: Are your employees eligible for an SEP-IRA?

If you own your own business, your employees are eligible to participate in the plan if they have been working for you for a minimum of three of the past five years, making at least $600 in the past year. Why don’t more small businesses use this type of IRA then? Because you, as the business owner, would have to contribute as much to their account as you do to yours. For example, if you wanted to contribute 10% of your income, you would also have to contribute 10% of that employee’s income as well. 

Need help planning for your future?

Southwestern Investment Group advisors work with you to identify your goals and create a sensible financial strategy that helps you achieve them. Contact us today to learn how you can meet the needs of retirement while you’re self-employed!

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Jeffrey T. Dobyns


President, SageSpring | Financial Advisor, RJFS 

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.