Best SEP IRA

The Best SEP IRA Providers

• Best for ETF and Mutual Fund Investing: Vanguard
• Best for Desktop Trading: E-Trade
• Best for Stock Research: Fidelity
• Best for Retirement Savers: TD Ameritrade

A simplified employee pension (SEP) IRA is a retirement savings account specifically designed for self-employed individuals. SEP IRAs allow entrepreneurs and independent contractors to contribute more to their retirement savings and open accounts for employees.

Small business owners often choose SEP IRAs for themselves and their employees because they can save for retirement tax-free and with significantly higher minimums than the supplementary traditional or Roth IRA. So, which plan is best for your investment objectives and helps you maximize your retirement contributions?

1. Best for ETF and Mutual Fund Investing: Vanguard

With more than $4.5 trillion in assets currently under management, Vanguard is one of the world's most prominent providers of mutual funds and retirement accounts, meaning that you can try an IRA plan with Vanguard and know that you’re in good hands.

Though Vanguard is not authorized to directly provide retirement investing advice, if you’re ready to open an account and make your first deposit, you’ll quickly master Vanguard's simple-to-use website. The company offers hundreds of professionally-managed mutual funds and low-cost ETFs in every industry imaginable. If you buy directly through Vanguard’s platform, you won’t pay commission on most fund investments, making a workplace plan that much more cost-effective.

You'll be hard-pressed to find another SEP IRA provider more straightforward about expenses than Vanguard. The broker's average fund expense ratio is just 0.12%, significantly lower than other brokerage firms. Vanguard's "Admiral Class" funds proffer even lower expense ratios for those who invest a minimum of $10,000 in an individual fund.

Its wide range of investment opportunities, low fees and hundreds of commission-free mutual funds lands Vanguard as one of our top choices. You can read more about Vanguard’s IRA resources on their website, or you can learn more about retirement options from the full review below.

Read Benzinga's full Vanguard Review

2. Best for Desktop Trading: E-Trade

Active day traders already know that E-Trade got its start pioneering the low-cost trading revolution, but many are unaware that the company also provides long-term investing options.

E-Trade offers full trading capabilities on both desktop and mobile platforms. Investment options for SEP IRA owners include stocks, bonds, mutual funds, ETFs and even options contracts.

With an intuitive platform and simple on-the-go trading options, E-Trade is a great choice for active traders who need an all-in-one home for their short and long-term investments. Investment products also include high yield savings for uninvested cash, real-time information to help with investment decisions and more.

Read Benzinga's full E-Trade Review

3. Best for Stock Research: Fidelity

Fidelity Investments is a mutual fund-based brokerage firm that has recently taken steps to ramp up its short trading tools to appeal to day traders with a unique retirement strategy.

The broker has not forgotten its roots, and Fidelity has even become one of the first companies to offer two separate index funds completely free of expense ratios, the Fidelity ZERO Total Market Index Fund and the Fidelity ZERO International Index Fund. Retirement investors will love the ZERO funds as well as Fidelity’s 3,700 low-expense mutual funds.

The characteristic that really makes Fidelity stand out amongst other SEP IRA providers is its commitment to customer service. Fidelity offers 24/7 human customer service—no robots or endless prompts here. The brokerage firm also operates over 180 physical investment centers around the United States, which allows you to connect with a personal finance expert.

Though there isn’t a Fidelity center in every city, it’s comforting for technophobes to have someone available to guide you.

Read Benzinga's full Fidelity Review

4. Best for Retirement Savers: TD Ameritrade

TD Ameritrade is largely considered to be the premier brokerage firm for active investors. If you trade stocks and bonds, you’ve likely already heard about TD Ameritrade’s extensive research tools and mobile-compatible platforms.

TD Ameritrade also offers SEP IRAs for retirement planning, and you can invest in over 13,000 mutual funds and 300 commission-free ETFs. Like E-Trade, TD Ameritrade’s platform was designed for frequent traders, so it may take some getting used to if this is your first time handling your own retirement savings.

Thankfully, TD Ameritrade also offers exceptionally comprehensive customer service, including 24/7 phone service, text and web chat support and hundreds of in-person consultation sites where you can find retirement planning advice from a personal finance expert.

Read Benzinga's full TD Ameritrade Review

Three Benefits: SEP IRA Over a Traditional or Roth IRA

1. Higher Contribution Limits

The draw to the SEP IRA over the traditional or Roth IRA is an increased contribution limit. When you open a standard IRA, you're limited to $5,500 in contributions annually if you’re under the age of 50 and $6,500 if you’re over 50. SEP IRA contribution limits max out at $56,000 annually or 25% of taxable income each year. This can mean an employer contribution can go much farther and you can max out at a level you prefer while still getting a tax deduction.

You must be at least 21 years old to open a SEP IRA and if you have full-time employees, you'll be required to make proportional contributions to their individual retirement accounts as well.  

2. Tax Advantages

Though some employers worry about opening a SEP IRA because they know that they’ll be required to make contributions to their employees’ retirement accounts, it’s tax-deductible for employers. The tax benefit alone makes this worth it for everyone. Review your plan document, make sure you know the max contribution for each employee or decide how you want to contribute to your own plan for accelerated retirement savings.

Like a traditional IRA, contributions are not taxed when deposited into an account but are taxed when they are withdrawn. Special circumstances also allow businesses to defer or skip contributions when sales are down.

3. Ease of Opening

Like a traditional or Roth IRA, a SEP plan can be opened quickly from home with the assistance of a major broker or banking institution.

What to Look for in a SEP IRA Provider

Easy Setup

SEP plans should not be more complicated to open than a traditional retirement account. The best SEP IRA providers offer streamlined, digitized processes, allowing small business owners and contractors the opportunity to open an account without leaving home.

Low Fees and Expense Ratios

With mandatory employee contributions for each full-time worker, be especially careful to monitor deposit and withdrawal fees, fund expense ratios and account maintenance expenses to ensure that you aren't losing any more money than necessary.

The best SEP plan providers clearly lay out an easy-to-understand schedule of fees and expenses and offer lowered costs to those who hold larger value accounts.

A Diverse Range of Investment Options

Mutual funds, ETFs, bonds, oh my! The best SEP IRA providers provide a range of investment choices. How much you should save and where you should hold your money varies widely depending on age, income level and the number of dependents you support. This is similar to what a pension plan does, but they hold all the money. In this case, each participant account can aim for more retirement income by leveraging funds held in the account.

Customer Service Options

The best SEP IRA providers offer extended customer service hours, web and live chat support and a responsive customer assistance team to make retirement planning easier for busy contractors and entrepreneurs.

Choose the Right SEP IRA for Your Situation

Though SEP IRAs can be a great choice for independent contractors and those who own very small businesses, expenses associated with mandatory employee contributions can quickly become overwhelming for business owners. Additionally, not everyone qualifies to open a SEP IRA; you must be over the age of 21, you must have worked for your current employer for at least three years, and you must receive at least $600 in compensation from the source of revenue that qualifies you for a SEP IRA each year. For those who do not qualify, a traditional or Roth IRA can provide a viable alternative to employer-free retirement savings. You can also speak to an investment advisor about what might work best for you until you can open a SEP and enjoy those tax benefits.

If you’re interested in learning more about the different types of IRAs available and what’s best for you, check out Benzinga’s IRA crash course.

Frequently Asked Questions