Small business owners and self-employed individuals can invest their SEP IRAs into alternative assets like real estate, private equity, crypto and more.
With a self-directed SEP IRA, you have the same structure and tax advantages as a regular SEP IRA, but with added investment flexibility. A Simplified Employee Pension (SEP) IRA is a tax-advantaged retirement account tailored for small business owners, self-employed individuals, and their employees. These accounts allow employers to contribute to their employees’ retirement or to their own, offering a straightforward and efficient way to build substantial retirement savings.
Once your account is opened and funded at Directed IRA, you’ll have full control of account funds and can invest in any asset allowed by law (see all investment types).
• Eligibility Requirements: Any small business owner or self-employed individual with earned income can participate in a SEP IRA, including sole proprietors and freelancers.
• Simpler Setup and Administration: Easier to set up and manage compared to a Solo 401(k), with no annual IRS filings (e.g. Form 5500) unless assets exceed $250,000.
• High Contribution Limits: Contribute up to 25% of your compensation, subject to IRS annual caps). SEP IRAs have significantly higher contribution limits compared to Traditional and Roth IRAs (up to 25% of compensation, max $70,000 in 2025).
• Employee vs. Employer Contributions: SEP accounts only allow employer contributions, whereas Solo 401(k)s allow both employee and employer contributions. Contributions are tax-deductible, reducing your taxable income and leaving more money to grow in the account.
• Alternative Investments: SEP IRAs can be self-directed into assets other than stocks, bonds, and mutual funds. All account types at Directed IRA can invest in real estate, private equity, and other non-traditional assets.
Open a Self-Directed SEP IRA
• Use our online portal to fill out a SEP IRA application or book a call to chat with our team first and get your questions answered.
Fund Your Account
• Transfer from an existing IRA, roll over funds from a 401(k) or other employer plan, or make new employer contributions (ACH, Check, Wire). The rules for SEP rollovers are the same as with Traditional IRAs.
Start Investing
• Account holders at Directed IRA can invest in any asset allowed by law. This includes alternative assets like real estate, notes, crypto, and more.
You can contribute up to 25% of an employee’s wages, up to a maximum of $70,000 (2025) annually. For self-employed individuals, contributions are based on net self-employment income after certain adjustments.
When is the contribution deadline for SEP IRAs?
• For sole proprietors and independent contractors filing Schedule C, the deadline is April 15th for prior-year contributions, extendable to October 15th with a tax extension.
• For partnerships and S-Corps, the deadline is March 15th, extendable to September 15th with a business return extension.
If you have employees, you must offer the same SEP IRA and contribution percentage to them as you do for yourself. However, only “eligible employees” must be included (those who are at least 21 years old and have worked for you for 3 out of the last 5 years).
Contributions come from the business and are capped at 25% of employee wages. For sole proprietors, it doesn’t matter whether you contribute from personal or business accounts, as it’s considered the same pool of funds.
Generally the Solo 401(k) is preferred over the SEP IRA as you can maximize contributions in a Solo 401(k) more quickly than you can a SEP IRA. For example, an S-Corp owner with a Solo(k) who takes a $100K W-2 could contribute $48,000 to their Solo 401(k) while a SEP IRA owner with the same $100K W-2 could only contribute $25,000. The reason for this is the Solo 401(k) allows for an employee contribution of $23,500 plus a 25% contribution based on the W-2 from the employer. The SEP IRA only allows for a contribution of 25% of wages.
One benefit of the SEP IRA is it allows for a 3-year employee eligibility rule, which is more flexible than the 1-year rule for Solo 401(k)s when hiring employees. This can make a SEP IRA more advantageous for businesses with staff. For example, if you run a small business and hire a part-time employee, they may not qualify for contributions under a SEP IRA until they’ve worked for you for 3 years, whereas a Solo 401(k) plan requires eligibility after just 1 year. This flexibility can make a SEP IRA more advantageous for businesses gradually building their team.
Yes, you can contribute to a self-directed SEP IRA even if you have other retirement accounts, as long as you meet the self-employed eligibility requirements.
Withdrawals from a self-directed SEP IRA follow the same rules as Traditional IRAs. If you withdraw funds before reaching the age of 59 1/2, you may incur a 10% early withdrawal penalty. Additionally, any taxable distributions are subject to ordinary income tax. These restrictions are set by the IRS and are subject to change.
Yes, rolling over funds into a self-directed SEP IRA is straightforward and tax-free when done properly. You can transfer funds from other SEP IRAs, traditional IRAs, traditional 401(k)s, or qualified retirement plans without facing penalties. For instance, if you have a previous employer-sponsored 401(k), you can roll those funds into a self-directed SEP IRA at Directed IRA. Learn more about funding your account.
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Directed IRA is a Tradename of Directed Trust Company. Directed Trust Company performs the duties of a directed custodian, and as such does not provide due diligence to third parties on prospective investments, platforms, sponsors or service providers, and does not sell investments or provide investment, legal, or tax advice. Directed Trust Company is not an FDIC-insured financial institution. Alternative investments are not insured by the FDIC; are not deposits or other obligations of, or guaranteed by Directed Trust Company or any of its divisions; and are subject to investment risks, including possible loss of the principal amount invested. While uninvested funds in certain types of Directed Trust Company accounts may be eligible for FDIC pass-through deposit insurance, certain conditions must be satisfied for such insurance coverage to apply. 2025 Directed Trust Company
Mat Sorensen, Attorney, CEO, and Founder of Directed IRA, wrote the #1 book on self-directed IRAs – selling over 50,000 copies nationwide. The Self Directed IRA Handbook is a comprehensive guide written for both investors and advisors alike. Download your free copy today!
