The SEP IRA is one of the best ways for small businesses and individual business owners to help employees save for retirement, and they’ll be able to contribute even more in 2025 than in 2024. The SEP IRA lets employers put away tens of thousands of dollars on behalf of employees, much more than an individual could save in a traditional IRA.
In 2025, those using a SEP IRA can contribute as much as $70,000 ($69,000 in 2024), or up to 25 percent of their business earnings or compensation, whichever is less. You can make SEP IRA contributions for 2024 up until tax day, which is April 15, 2025. Because a SEP IRA is funded by the employer, it does not offer a catch-up contribution.
The increases are part of a broader range of hikes to contribution limits across many types of retirement accounts, including traditional and Roth IRA as well as 401(k) and 403(b) plans.
SEP IRA contribution limits
The contribution limit for a SEP IRA is the lesser of:
- 25 percent of the employee’s compensation
- $70,000 in 2025 ($69,000 in 2024)
The SEP IRA is an employer contribution rather than an employee contribution, so it’s made by the company rather than the individual. A SEP IRA does not offer a catch-up provision for older workers, as do retirement plans such as an IRA or 401(k).
In contrast, another option popular with one-person businesses – the solo 401(k) – does allow catch-up contributions, making it a potentially more attractive option for some small businesses.
The SEP IRA has a limit on the annual compensation that is used for figuring retirement plan contributions. For 2025, that limit is $350,000, an increase from $345,000 in 2024. That limit is adjusted annually by the IRS.
Can you contribute to an IRA and a SEP IRA?
Participating in a SEP IRA with its employer contributions does not prohibit you from making contributions to a traditional or Roth IRA. So your employer could make a full contribution to your SEP IRA, and you could also make a maximum contribution to your own traditional or Roth IRA in the same tax year.
However, if you as an employee (not an employer) contribute money to your SEP IRA (which some SEP IRA plans allow), then it reduces your contribution limit to other IRAs dollar-for-dollar.
So if you’re looking to max out your retirement savings, then let your employer contribute the maximum to your SEP IRA while you as an employee contribute to your own separate IRA.
SEP IRAs now offer a Roth option
The Roth IRA is one of the most popular and powerful retirement accounts, and now the SEP IRA offers the Roth after-tax option for small businesses.
Before 2023, a SEP IRA came in only one type: pre-tax. Employers contributed money for employees, but when the money was withdrawn at retirement, the employee paid tax at ordinary income rates. The distribution rules generally work as they would for a traditional IRA.
Now, thanks to the SECURE Act 2.0, employers are able to offer Roth SEP IRA plans. The money goes in after-tax, can grow tax-free and is tax-free when withdrawn at retirement.
Bottom line
The SEP IRA offers a way for small businesses to contribute to their employees’ retirement plans. The maximum contributions usually increase annually, so it’s important to stay up to date on the limits if you’re looking to max out your retirement contributions.
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