SEP IRA Contribution Limits for 2018

Saving for Retirement

How Much Can You Contribute to a SEP IRA for 2018?

The maximum contribution is $55,000, up from $54,000 in 2017 and significantly more than can be saved for retirement in a regular IRA.

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A Simplified Employee Pension IRA, or SEP IRA for short, is a good option for self-employed workers and small-business owners who want an easy and inexpensive retirement plan. A SEP IRA is also generous, allowing retirement savers to put away much more than they could with some other retirement accounts.

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SEP IRA Contribution Limits for 2018

For 2018, a self-employed business owner can salt away as much as 20% of his or her net income in a SEP IRA, not to exceed $55,000. That's up from $54,000 in 2017. In comparison, a traditional IRA limits contributions to $5,500 a year for those younger than 50, or $6,500 for those 50 or older thanks to a $1,000 catch-up contribution.

SEP IRAs are available for a variety of small-business types, including sole proprietorships, partnerships, limited liability companies, S corporations and C corporations. The plans can be an especially attractive option for a small business with few employees, says Brad Ronsley, a certified financial planner in Glen Ellyn, Ill.

There's a twist, however, when it comes to SEP IRAs. Unlike some other retirement plans, a SEP IRA allows only the employer to contribute. And whatever percentage of compensation employers set aside in the plan for themselves is the same percentage of pay they must contribute for each eligible employee.


To be eligible to participate in an employer's SEP IRA, employees must be at least 21 years old, have worked at the business for three of the past five years and have earned at least $600 from the job in the past year.

SEP IRAs vs. Traditional IRAs

SEP IRAs follow many of the same rules as traditional IRAs. You generally must be at least 59½ to take withdrawals from the account without paying a 10% penalty.

And once you turn age 70½, you will have to start taking required minimum distributions. You have until April 1 of the year after you turn 70½ to take your first required minimum distribution, but after that you must take RMDs by Dec. 31 of each year (even if you took your first RMD on April 1 of that same year).

Since employers make the contributions, not employees, catch-up contributions for retirement savers 50 and over are not permitted in SEP IRAs.


A SEP IRA is easy to open and widely available at financial institutions that offer individual retirement accounts. A business owner must first complete an application with a brokerage or investment company such as Fidelity, Vanguard or Charles Schwab, says Todd Youngdahl, a certified financial planner in Falls Church, Va. This type of account allows business owners to develop an investment strategy and portfolio with many choices for investments, including mutual funds, exchange-traded funds and individual stocks, at little operational cost, he says.

"In most cases, there is no set-up fee for a SEP IRA and no annual custodial or maintenance fee," Youngdahl says.

You can build a sizable nest egg with a SEP IRA. For example, take a 30-year-old who contributes $10,000 a year to a SEP IRA and has an annual return of 6%. By age 65, he or she will have contributed $350,000, but the nest egg will have grown to nearly $1.2 million.

A SEP IRA would be a good option for someone with a side gig outside of his or her regular job, says Mark Beaver, a CFP in Dublin, Ohio. It would allow the worker to contribute fully to his or her employer's 401(k) and use the SEP IRA for self-employment income, Beaver says.

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