SEP IRA

A SEP IRA, or Simplified Employee Pension Individual Retirement Account, is a retirement savings plan that lets self-employed individuals and small business owners make tax-deductible contributions to their own retirement accounts. Contributions are made by the employer only, reduce taxable business income in the year they are made, and grow tax-deferred until withdrawn in retirement. The plan is straightforward to set up and requires no annual IRS filing for the plan itself.

McLane Advisors helps self-employed clients open, fund, and manage a SEP IRA in a way that maximizes annual contributions without disrupting cash flow. We align your contribution amount with your net self-employment income, your tax picture for the year, and your long-term retirement goals. For many self-employed Texans, a SEP IRA is the most practical entry point into structured, high-limit retirement savings.

Any self-employed individual, small business owner, sole proprietor, or freelancer with earned income can open a SEP IRA. There is no minimum age requirement, and accounts can be opened and funded up until the tax filing deadline, including extensions. If you have employees, you are generally required to contribute the same percentage of compensation to eligible employee accounts as you contribute to your own, which is an important factor to consider when selecting this plan structure.

For solo operators with no employees, the SEP IRA offers a clean, low-maintenance path to significant tax-deferred savings. McLane Advisors evaluates your business structure, income, and employee situation before recommending a SEP IRA to confirm it is the right fit. If other structures would serve you better, we say so and walk you through the alternatives clearly and honestly.

SEP IRA contributions are limited to the lesser of 25% of your net self-employment income or the annual IRS cap, which was $69,000 for 2024. This is a significantly higher ceiling than a traditional or Roth IRA allows, making it a powerful tool for accelerating retirement savings during high-income years. Contribution amounts can vary year to year, which gives you the flexibility to save more when revenue is strong and contribute less when cash flow is tighter.

McLane Advisors helps you calculate the optimal contribution for each tax year, balancing retirement savings goals against current cash flow needs and tax strategy. We factor in your total income picture, including any other retirement accounts you hold, to ensure contributions are structured for maximum efficiency. Making the most of your allowable contribution is one of the most impactful financial moves a self-employed individual can make.

A SEP IRA is funded entirely by employer contributions, is easy to set up, and carries no Roth option or loan feature. A Solo 401(k) allows both employee and employer contributions, which can significantly increase total annual savings, especially at lower income levels where the SEP IRA's employer-only formula may produce a smaller deduction. Solo 401(k)s also offer a Roth contribution option and the ability to borrow from the plan, giving high earners more tools to work with.

The right choice depends on your income level, business structure, and financial goals. High earners who want Roth flexibility or loan access often benefit from a Solo 401(k). Those who want simplicity and minimal administration often prefer a SEP IRA. McLane Advisors walks you through both options and recommends which structure, or combination, gives you the best long-term outcome for your specific situation.

In most cases, yes. Self-employed individuals can hold multiple retirement accounts simultaneously, though contribution limits and eligibility rules apply across all of them. You may be able to contribute to both a SEP IRA and a traditional or Roth IRA in the same year, subject to income limits. However, you generally cannot contribute to both a SEP IRA and a Solo 401(k) for the same self-employment income in the same year.

McLane Advisors evaluates your full retirement picture before recommending any account structure. We look at what you currently hold, what you are eligible for, and how to coordinate contributions across accounts for the greatest tax efficiency and long-term growth. Our goal is always to find the combination that works hardest for you within the rules that apply to your situation.

Contributions to a SEP IRA are tax-deductible in the year they are made, directly reducing your net self-employment income and your federal tax liability. The account then grows tax-deferred, meaning no taxes are owed on gains, dividends, or interest until you take distributions in retirement. For self-employed individuals without access to an employer-sponsored plan, this combination of immediate deduction and long-term deferred growth is one of the most powerful financial tools available.

McLane Advisors integrates SEP IRA tax planning into a broader strategy that may also include deduction timing and withdrawal sequencing in retirement. The goal is to reduce your tax burden both now and in the future, keeping more of your earnings working for you across your entire financial life. We build these strategies around your actual numbers, not general assumptions, so every recommendation reflects your specific situation.

A SEP IRA works well for most self-employed structures, including sole proprietorships, single-member LLCs, multi-member LLCs, S Corps, and partnerships. The key consideration is whether you have employees, because SEP IRA rules generally require you to contribute the same percentage of compensation to eligible employee accounts as you contribute to your own. For solo operators, this is not an issue, and the SEP IRA offers a straightforward, high-limit savings vehicle with very little overhead.

For business owners with employees, McLane Advisors evaluates whether a SEP IRA, Solo 401(k), SIMPLE IRA, or Safe Harbor 401(k) is the better fit based on your team size and benefit goals. Our small business retirement planning services cover this full range of options so you never have to navigate the decision alone. The right plan is always built from the ground up around your specific circumstances.

McLane Advisors starts with a conversation about how you earn, how your income varies, what your tax situation looks like, and what you want retirement to look like. From that foundation, we evaluate which account structures align with your goals: a SEP IRA for simplicity and high limits, a Solo 401(k) for Roth access, a contributory IRA for supplemental savings, or a combination. We also factor in any existing accounts and how new contributions interact with them across your full financial picture.

The process does not stop at account setup. McLane Advisors reviews your plan regularly and adjusts contribution strategy as your income and goals change. Learn more about who we are and the values that guide every recommendation we make. Self-employed financial planning requires more flexibility than a standard employer plan provides, and we build that flexibility into every strategy we design.

Yes. A SEP IRA can be rolled over into another IRA, a Solo 401(k), or most other qualified retirement plans. Rollovers are common when consolidating accounts, transitioning from self-employment to salaried work, or repositioning savings into a different investment structure. When handled correctly, a rollover is tax-free and preserves the tax-deferred status of your funds. If the distribution is not rolled over within 60 days, it may be treated as taxable income and subject to penalties.

McLane Advisors manages rollover coordination as part of our broader retirement services. We review your existing accounts, evaluate your options, and execute the transition in a way that protects your savings. Our 401(k) and 403(b) rollover services apply the same disciplined approach to self-employed clients navigating account transitions at any stage of their career.

Getting started is straightforward. Call our Montgomery or Tomball offices during business hours, Monday through Friday from 8:30am to 2:00pm. We begin with a conversation about your business structure, income, tax situation, and retirement goals. One of the most useful first steps is a complimentary Retirement Analysis, which gives you a clear picture of where you stand today and what a stronger plan could deliver.

From there, McLane Advisors builds a personalized strategy and walks you through every decision without jargon or pressure. Whether you are opening your first retirement account or optimizing a plan already in place, we have the expertise and independence to guide you toward the right outcome for your specific situation.