SEP IRA Calculator

Calculate your maximum annual SEP IRA contribution and see how much your savings could be worth at retirement. This calculator determines your contribution limit based on your net self-employment income and business type, then projects the growth of your account year by year.

This tool is designed for self-employed individuals, freelancers, independent contractors, and small business owners who want to save for retirement tax-efficiently. If you're just starting, our guide to retirement planning for beginners is a great resource. For a broader view of your overall plan, use the main retirement calculator.

The calculator provides a complete picture of your SEP IRA's potential. You'll see your maximum contribution for 2026, the projected balance at retirement, a year-by-year growth chart, and a breakdown of how much comes from contributions versus investment growth. It also compares your SEP IRA contribution limit to what you could potentially save in a Solo 401(k).

Begin by entering your business details. Your "Net Self-Employment Income" is your business revenue minus expenses. If you are incorporated and pay yourself a salary, enter your W-2 wages here. For "Business Type," enter 1 if you are a sole proprietor or single-member LLC, or 0 if you operate as a corporation (S-Corp or C-Corp). This choice affects the contribution formula.

Next, provide your personal details to project your savings growth. Enter your "Current Age" and planned "Retirement Age" to set the timeline. Input your "Current SEP IRA Balance" to give the projection a starting point. Finally, add your "Expected Annual Return" as a percentage to model investment growth.

The advanced settings allow for more detailed planning. If you have employees, enter the "Number of Employees," as you may be required to contribute for them. The "Annual Raise Rate" lets you model how future income growth could increase your contributions over time, helping you save more as your business grows.

Once your information is entered, click "Calculate" to see your results, including your maximum contribution, a growth projection, and a comparison to other retirement plans.

Net Self-Employment Income

This is the foundation of your contribution calculation. For sole proprietors, freelancers, and independent contractors, this is your gross income less your ordinary and necessary business expenses (the profit shown on your Schedule C). For owners of S-Corps or C-Corps, this is the W-2 salary you pay yourself from the business. A higher income generally allows for a larger contribution, up to the annual limit.

Business Type

Your business structure directly impacts how your maximum contribution is calculated.

• Sole Proprietor / LLC (enter 1): Your contribution is based on your net earnings from self-employment after deducting one-half of your self-employment taxes. This results in an effective contribution rate of about 20% of your net self-employment income.
• Corporation (enter 0): Your contribution is simpler to calculate: it's up to 25% of your W-2 compensation.

Current Age & Retirement Age

These inputs define your investment horizon. The longer the time between your current age and retirement age, the more years you have for your contributions and investment returns to compound. A longer timeline can dramatically increase your projected retirement savings.

Current SEP IRA Balance

This is the amount you already have saved in your SEP IRA. The calculator uses this as the starting principal for the growth projection. If you are just opening a SEP IRA, you can enter $0.

Expected Annual Return

This is the average annual rate of return you expect your investments to generate. This percentage is a key driver of compound growth. A typical long-term return for a diversified stock portfolio is often estimated between 7% and 10%, but you should choose a rate that reflects your personal investment strategy and risk tolerance.

Number of Employees

If you have employees, you generally must contribute the same percentage of compensation for all eligible employees as you do for yourself. This is a critical rule for SEP IRAs. This input helps you remember this obligation, which can significantly impact the total cost and feasibility of the plan. A Solo 401(k) is only an option if you have no employees (other than a spouse).

Annual Raise Rate

This is the percentage by which you expect your net income or salary to increase each year. The calculator uses this rate to project your future contributions, assuming they will rise with your income. This provides a more dynamic projection than assuming a flat contribution amount forever.

This calculator uses IRS rules and a year-by-year projection model to estimate your SEP IRA potential.

First, it determines your maximum annual contribution for the current year. For corporations, it multiplies your W-2 compensation by 25%. For sole proprietors, it performs a more detailed calculation: it takes your net self-employment income, subtracts one-half of your self-employment taxes to find your net adjusted earnings, and then multiplies that base by 20%. In both cases, the result is capped at the annual IRS limit of $70,000 for 2026.

Next, the calculator projects the growth of your savings. Starting with your current balance, it runs a year-by-year simulation until your chosen retirement age. Each year, it adds your calculated maximum contribution and then applies your expected annual return to the new balance. If you've entered an annual raise rate, the contribution amount increases each year accordingly, up to the IRS limit.

Finally, the calculator provides a "Contribution Optimization" score, which shows how much of the maximum possible SEP IRA limit your income allows you to use. It also calculates the maximum contribution you could make to a Solo 401(k) to provide a direct comparison.

The calculator uses specific formulas based on IRS guidelines for SEP IRA contributions.

Contribution Formula (Corporation)

For S-Corps and C-Corps, the calculation is a straightforward percentage of your W-2 salary.

max contribution = min(W-2 salary * 0.25, 70000)

Contribution Formula (Sole Proprietor / LLC)

For sole proprietors, the calculation must account for the self-employment tax deduction.

adjusted income = net self-employment income * 0.9235
se tax deduction = adjusted income * 0.153 * 0.5
compensation base = adjusted income - se tax deduction
max contribution = min(compensation base * 0.20, 70000)

Solo 401(k) Maximum Contribution (for comparison)

The calculator also estimates the maximum you could contribute to a Solo 401(k) with the same income.

employee deferral = min(23500, net income)
employer contribution = (same as SEP IRA employer contribution)
max solo 401k contribution = min(70000, employee deferral + employer contribution)

Year-Over-Year Growth Projection

The future balance is projected annually.

annual growth = current balance * (expected return / 100)
ending balance = current balance + annual contribution + annual growth

A SEP (Simplified Employee Pension) IRA is a retirement plan designed for self-employed individuals and small business owners. It allows for much higher annual contribution limits than a Traditional or Roth IRA, making it a powerful tool for catching up on retirement savings.

You are generally eligible to open a SEP IRA if you:

• Are a freelancer, independent contractor, or sole proprietor.
• Own a small business (LLC, partnership, S-Corp, or C-Corp).
• Earn any amount of self-employment income, even from a side job.

The key benefits of a SEP IRA are its high contribution limits and administrative simplicity. There are no annual IRS filing requirements for the business owner (unlike a 401(k)), and setting up an account is as easy as opening a regular IRA. Contributions are made by the employer (you) to a traditional IRA in the employee's name (also you). These contributions are tax-deductible for the business.

For self-employed individuals with no employees, the SEP IRA and the Solo 401(k) are the two most popular retirement plans. The best choice depends on your income level and savings goals.

A SEP IRA is often best for:

• Simplicity: It is the easiest plan to set up and maintain, with minimal paperwork.
• Higher Incomes: If your income is high enough, you can contribute the same maximum amount ($70,000 in 2026) as a Solo 401(k).
• Businesses with Employees: While it requires you to contribute for eligible employees, the rules are straightforward and easy to administer.

A Solo 401(k) is often better for:

• Maximizing Savings at Lower Incomes: The Solo 401(k) allows you to contribute as both the "employee" and the "employer." The employee contribution ($23,500 in 2026) lets you save a significant amount even with a modest business income. A SEP IRA only has an employer contribution, which is limited to a percentage of your income.
• Roth Contributions: Solo 401(k) plans can offer a Roth option, allowing for tax-free growth and withdrawals. SEP IRAs do not have a Roth feature.
• Plan Loans: Most Solo 401(k) plans allow you to take a loan from your account balance. SEP IRAs do not permit loans.

The calculator's comparison table is a powerful feature that shows you exactly how much you could contribute to each plan based on your specific income.

For 2026, the SEP IRA contribution rules are straightforward:

• Contribution Limit: You can contribute the lesser of 25% of your compensation or $70,000.
• Compensation Base: For sole proprietors, "compensation" is your net adjusted self-employment income. For corporations, it's your W-2 salary.
• Contribution Type: All contributions are made by the employer (even if that's you) and are considered pre-tax. They are tax-deductible for the business.
• Employee Rules: If you have eligible employees, you must contribute the same percentage of their compensation to their SEP IRAs as you contribute for yourself.
• No Catch-Up Contributions: Unlike a 401(k) or traditional IRA, there are no specific age-based catch-up contributions for a SEP IRA. The limit is the same for everyone.
• Deadline: The deadline to establish and fund a SEP IRA for a given tax year is your business's tax filing deadline, including extensions.

• Max Contribution: This is the maximum tax-deductible amount you can contribute to your SEP IRA for the year based on the income and business type you entered. This is your primary tax-shielding opportunity.
• Effective Rate: This shows your contribution as a percentage of your net income. For corporations, this will be 25%. For sole proprietors, it will be lower (around 20%) due to the self-employment tax adjustment.
• Projected Balance at Retirement: This is an estimate of your SEP IRA's value at your chosen retirement age, assuming you make the maximum contribution each year and achieve your expected return.
• Contributions vs. Growth Chart: This donut chart visualizes the power of compounding. Over a long period, you'll often see that investment growth makes up a larger portion of your final balance than your total contributions.
• Contribution Optimization Score: This score shows how close your maximum contribution is to the absolute IRS dollar limit ($70,000 for 2026). A high score indicates your income is high enough to take full advantage of the plan's potential.
• SEP IRA vs. Solo 401(k) Table: This is a key action-oriented result. If the Solo 401(k) max contribution is significantly higher, it may be worth exploring that option, especially if you have no employees.

If you want to save more, consider these strategies:

• Increase Business Income: Since your contribution is a percentage of your income, growing your business is the most direct way to increase your retirement savings potential.
• Re-evaluate Business Structure: If you operate as a sole proprietor, incorporating and paying yourself a reasonable W-2 salary could allow you to contribute a higher percentage (25% vs. ~20%). This is a complex decision that requires consulting a tax professional.
• Switch to a Solo 401(k): If the calculator shows a much higher potential contribution for a Solo 401(k) and you have no employees, switching plans could be your single biggest move to accelerate your savings.
• Supplement with Other Accounts: You can still contribute to a Roth IRA or Traditional IRA in addition to your SEP IRA, subject to income limits. This adds another layer of tax diversification to your retirement plan.

1. Incorrectly Calculating Compensation: This is especially common for sole proprietors who forget to deduct one-half of their self-employment tax before applying the contribution percentage.
2. Forgetting Employee Contributions: The most serious mistake is failing to contribute for all eligible employees at the same percentage rate as for yourself. This can lead to plan disqualification and penalties.
3. Missing the Setup Deadline: You must establish the SEP plan by the tax filing deadline (including extensions) for the year you want to make a contribution. You can't create a plan for 2026 in late 2027.
4. Choosing a SEP IRA When a Solo 401(k) is Better: Many self-employed individuals with moderate incomes could save far more in a Solo 401(k) but choose a SEP IRA out of habit or lack of awareness.