The Self-Directed SEP IRA: How to Save & Invest More— Faster

If you’re self-employed or a small business owner looking for a way to save for retirement, SEP IRAs are an excellent option to consider. Easy to set up and maintain, SEPs are retirement saving without the hassle —plus the added bonus of much higher contribution limits, so you can save and invest more, faster.

So wait, that’s easier set-up and more savings? If that sounds like your dream IRA, here’s what you need to know:

Who Qualifies for a Self-Directed SEP IRA?

A SEP IRA is an Individual Retirement Account (IRA) for small business owners with one or more employees. This includes yourself, so if you’re self-employed, this plan is also for you. With a self-directed SEP IRA, you can invest beyond the traditional stock market, in more than just stocks, bonds, and mutual funds.

If you already have a retirement account, your provider probably limits you to specific investments and offerings— but not with a self-directed IRA. With a self-directed IRA, you can invest in almost anything— all within a tax-advantaged environment. 

Why Choose a SEP IRA?

SEP IRAs are a great choice for many investors. They have much higher contribution limits than Traditional and Roth IRAs (details here). So if you’re contributing at the max, that’s way more than your typical IRA. Additionally, contribution amounts aren’t set in stone— you can change them as needed, from year-to-year. For more information on contributions, see our contributions page.

A self-directed SEP IRA gives you all the benefits of a SEP (tax-deferred savings, higher contribution limits, quick and easy set-up, low maintenance fees) while letting you invest your retirement fund outside the traditional market. From apartment complexes and condos, to private placements and tax liens, you can take your savings and put them in almost any investment you want— true freedom, ASAP.

Plus, they’re not complicated accounts to maintain. They don’t have reporting requirements and don’t have high costs to keep up. So that way you can invest more, faster. Especially when it comes to investing in assets like real estate, getting those funds into your account fast can help you make and leverage investments much, much quicker.

Who Can Open a SEP IRA?

A SEP IRA is reserved for business owners with one or more employees (including yourself— if you’re self-employed, you’re eligible for a SEP). So if you work for yourself, you could be saving (and investing!) for your retirement at the same time. They’re very popular with real estate agents, freelancers, doctors and lawyers with their own practices, and other self-employed professionals.

SEP IRA Establishment and Contributions

You have until the business’ tax return deadline (including extensions) to establish and contribute to a SEP IRA for you and your employees.

The way these plans work, they are funded solely by employer-contributions— this means employees can’t contribute directly to the account, beyond what is funded by the company. The company is also required to contribute the same percentage of income for ALL employees (including yourself). So for example, if you contributed 10% of salary for all of your employees, you couldn’t go and contribute 20% of salary to your personal SEP IRA— either you’d lower your contribution to 10%, or raise your employees to 20%. However, this amount is not set in stone, so you can contribute 10% one year and 20% the next (or the other way around) if you’d like. Even if an employee leaves in the middle of the year, you still must contribute to their IRA.

You don’t have to include all employees in the plan, but you MUST include them if:

• They’re 21 or older
• Have worked for your business for 3 of the last 5 years
• Made at least $600 in compensation over the last year

You’re welcome to include employees who don’t meet these conditions (i.e. no age limit for plan participation), but if they meet these conditions they must be in the plan.

Relevant: SEP IRA Contribution Limits and Rules

How to Open a SEP

The deadline to establish and contribute to a SEP IRA is the deadline for the employer’s tax return, including extensions (unlike the typical April 15^th deadline).

If you’re ready to open your self-directed SEP IRA, here’s the process:

Step 1: Download and complete our New Account Application, including page 1 of the SEP IRA Contribution Agreement. You’ll need to physically sign the application (digital signature not accepted) before submitting. Keep a copy of this agreement for your record.

Step 2: Sign and submit the application, including page one of the contribution agreement. Be sure to also include a copy of a non-expired government identification (like a driver’s license, identification, or passport). Be sure your signature is legible and that the address is current (if not, you can submit a current utility bill for proof of address).

Step 3: Do you have any existing retirement savings, like an old 401(k) plan? Once the account is open, this is when you’d move those funds. You can transfer or rollover your old accounts easily. If you don’t have any existing retirement funds, you can start making contributions right away by sending funds to our processing office.

Step 4: Once your funds have arrived, you can start investing! What do you want to do? There are so many options for self-directed investing…. like:

•  Real Property, like condominiums, single-family homes, commercial real estate
•  Tax Liens
• Private Placements
• Secured and Unsecured Promissory notes
• And more!

In a Nutshell

A SEP IRA comes with a lot of benefits for small business owners— and a self-directed IRA gives you even more. More freedom, more savings— more for your retirement.

Does a Self-Directed SEP IRA sound like the right choice for you and your financial plans? If so, we’d be happy to help. Reach out to one of our CISP certified IRA experts and we’d be glad to answer your questions.

*maximum contribution limits apply. See the current SEP IRA contribution limits.