If you are a small business owner or self-employed, you can immensely benefit from a SEP IRA plan. Essentially, a SEP IRA plan is a retirement plan that comes with tax-related advantages, which means that as a small business owner or as a self-employed individual, you can make contributions to your own IRA, which will be employer-funded.

The key benefits of a SEP IRA include that this retirement plan comes with a low administrative cost. The setup is quite easy, too. More importantly, it offers high contribution limits, which means that you can deposit up to 25% of your income.

Know How Much You Can Contribute

You must use a sep ira contribution calculator to accurately determine the maximum eligible amount that you can contribute to the SEP IRA plan. You should know that the eligible contribution that you can make to the plan depends on your specific situation, such as your particular income and the structure of your business, such as a corporation or sole proprietorship. 

Similarly, the maximum allowable contribution depends on the mandatory proportional contribution that you, as a small business owner, must make for all your eligible employees. You might want to opt for a SoFi SEP IRA account, as it is a great online choice for opening a SEP IRA. 

Know the Contribution Deadline

When it comes to the effective management of your SEP IRA plan, you must know about the contribution deadline. Typically, small business owners or employers must contribute to a SEP IRA by April 15th, which is the typical tax filing deadline. Nonetheless, if you have filed an extension for your taxes, then the final contribution date of your SEP IRA plan will be October 15th.

Speaking of the contribution deadline, you should know that all contributions are made in tax-deductible money. As a self-employed individual or a small business owner, you are eligible to open a SEP IRA account to contribute to your own retirement savings.

Know the Contribution Limits

You must understand the potential contribution limits regarding the SEP IRA. For 2025, the contribution limit is 70 thousand U.S. dollars or roughly 25% of employee compensation. Typically, all SEP IRA contributions must be made by the employer themselves; their contributions can vary between 0% and 25% of the total compensation. An employer must ensure that each of their eligible employees receives the same percentage.

Nonetheless, if you are a self-employed individual, you can make the employer contribution on your own behalf.

Understand the Disadvantages 

While managing your SEP IRA plan, it is important to understand the potential disadvantages of this retirement plan. Now, the basic disadvantage of a SEP IRA is that it does not enable employee contributions, whereas other retirement plans, such as 401(K), allow employers to make their own contributions from their respective incomes to the retirement plan. 

However, with a SEP IRA plan, you can only rely on your employer to make some much-needed contributions for you. And of course, if you are self-employed, you must act as an employer and make the contributions to your account on your own