Skip to main content


Consider this flexible, no-hassle plan with generous contribution limits.

What is a SEP-IRA?

A SEP-IRA (Simplified Employee Pension) is a simple, tax-deferred retirement plan for anyone who is self-employed, owns a business, employs others, or earns freelance income.

Who can participate

Employers are generally the sole contributors, but employees may be able to make traditional IRA contributions to the SEP-IRA.

Employer contribution limits

  • You may contribute up to 25% of the employee's total compensation or a maximum of $57,000 for the 2020 tax year and $58,000 for the 2021 tax year, whichever is less.
  • If you're self-employed, your contributions are generally limited to 20% of your net income. (Net compensation for self-employed individuals is generally the net profit from IRS Schedule C reduced by the deductible self-employment tax. The eligible compensation limit, indexed for inflation by the IRS, is $285,000 for 2020 and $290,000 for 2021.)
  • Contributions are deductible and aren't required every year.
  • Contributions must be the same for employers and employees up to the specified limit.

Employee contribution limits

  • Employees may be able to make traditional IRA contributions to the SEP-IRA of up to $6,000 ($7,000 for employees age 50 or older) for the 2021 tax year.
  • This amount is the total contribution allowed by the IRS that employees can make to all their IRAs (SEP, traditional, or Roth) each year.

Investment choices

A one-person SEP-IRA. More than 100 Vanguard mutual funds, including many of our index funds with Admiral™ Shares. Also Vanguard ETFs (exchange-traded funds), plus mutual funds and ETFs from other companies, individual stocks, CDs (certificates of deposit), and bonds.


Generally, employees must be allowed to participate if they're 21 or older, earn at least $600 in the tax year, and have worked for you in at least 3 of the past 5 years. Employers may set less restrictive eligibility rules.

Vanguard plan features

Vanguard Personal Advisor Services® is available for one-person SEP-IRAs only (requires a $50,000 minimum investment).

Account service fees

We charge $20 a year for each Vanguard fund with an account balance less than $10,000. The fee can be waived in certain circumstances.

Account setup & maintenance

  • There's no fee to establish an account.
  • Certain employee notifications are required, but there's no IRS reporting.

Withdrawals & loans

  • All contributions to your SEP-IRA belong to you immediately, and you can withdraw them at any time.
  • You may not take a loan from your SEP-IRA.


  • If you withdraw before age 59½, you're subject to a 10% federal penalty tax. Certain exceptions may apply. You'll pay ordinary income tax on any taxable distributions.

Get started with this plan

Get complete portfolio management

We can custom-develop and implement your financial plan, giving you greater confidence that you're doing all you can to reach your goals.

Make retirement saving easy

If you don't know how to start saving for retirement, we can help you figure out how much you'll need and how to balance all your savings goals.

Consolidate your accounts

Consider moving accounts you hold elsewhere to Vanguard. You'll enjoy more control of your portfolio now and get a clear picture of your investment strategy.


Layer opened.

Traditional IRA

A tax-deferred individual retirement account. Contributions are fully deductible for all individuals who are not active participants in employer-sponsored plans or for plan participants within certain income ranges.

Layer opened.

Roth IRA

A type of IRA that lets an investor save up to a certain amount of after-tax dollars each year. The earnings in the account grow tax-free, and distributions taken after age 59½ (if the account has been open at least 5 years) are exempt from taxes.

Layer opened.

Mutual fund

A type of investment that pools shareholder money and invests it in a variety of securities. Each investor owns shares of the fund and can buy or sell these shares at any time. Mutual funds are typically more diversified, low-cost, and convenient than investing in individual securities, and they're professionally managed.

Layer opened.

ETF (exchange-traded fund)

A type of investment with characteristics of both mutual funds and individual stocks. ETFs are professionally managed and typically diversified, like mutual funds, but they can be bought and sold at any point during the day using straightforward or sophisticated strategies.

Layer opened.


An investment that represents part ownership in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits.

Layer opened.

CD (certificate of deposit)

An insured, interest-bearing deposit that requires the depositor to keep the money invested for a specific period of time or face penalties. Brokered CDs can be traded on the secondary market.

Layer opened.


A loan made to a corporation or government in exchange for regular interest payments. The bond issuer agrees to pay back the loan by a specific date. Bonds can be traded on the secondary market.

Layer opened.

Index fund

A fund that buys all (or a representative sample) of the securities in a specific index, such as the S&P 500 Index.