Saving with SEP IRA

A Simplified Employee Pension Individual Retirement Account, or SEP IRA, lets you save and invest for the future with tax advantages you can’t get from regular savings and investment accounts. It offers the features of an IRA with higher limits and employer-only contributions.

A SEP IRA offers many of the same features and benefits as other retirement  plans, but without the start-up expense, administrative fees, complexities and reporting requirements usually associated with larger plans.

• Employer contributions: A SEP IRA is funded entirely by employer contributions, with limits substantially higher than regular IRAs. Participation is mandatory for all eligible employees, including part-time and seasonal employees.

• Convenience: Once in place, a SEP IRA plan is easy to operate. Contributions are sent to the plan provider, who deposits them into employee accounts and handles annual statements and applicable filings with the IRS.

• Tax advantages: Employers can offer a traditional SEP IRA for pretax contributions, a Roth SEP IRA for after-tax contributions or both. Each has unique benefits that may help you save more with less (see next section).

• Growth potential: A SEP IRA gives you the opportunity to invest your account for growth potential. This allows you to take advantage of the power of compounding, which may increase your account balance through the potential for earnings on your earnings.

• Wide-ranging investment selections: Like other IRAs, employees choose and manage their own investments. SEP IRAs offer a broad variety of investment options, including “do it for me” options like target date funds to make investing easier.*

• Portability: If you leave your employer, you can generally move your funds to another IRA or, to another employer-sponsored retirement plan that accepts rollovers.

• Support: With your SEP IRA, you’ll have access to Corebridge’s planning and learning resources to help you take action for your future. This includes one-on-one help from a Corebridge financial professional.

A SEP IRA may allow two types of contributions: traditional SEP IRA contributions (pretax), Roth SEP IRA contributions (after-tax), if offered by your employer, or both. Consult with a tax advisor for assistance based on your situation.

Traditional SEP IRA pretax contributions (taxes later)

With the pretax option, contributions are made before taxes are calculated and are deducted dollar for dollar from your taxable income in the year they are made. That means potentially lower annual taxes while you’re saving. Contributions and earnings are taxed when withdrawn. Funds withdrawn prior to age 59½ may be taxable and subject to an additional 10% tax.

When to consider this option

• You are in a higher tax bracket now than you expect to be in retirement.
• You want to reduce your current taxable income.

Roth SEP IRA after-tax contributions (taxes now)

With this option, contributions are made after taxes are calculated. Contributions are tax free when withdrawn, and any earnings can be withdrawn tax free as long as (1) it’s been at least five years from the beginning of the first year in which a Roth contribution was made and (2) you’re at least 59½, you’re disabled, or the payment is made after your death to your beneficiary. Otherwise, distributed earnings may be taxable and subject to an additional 10% tax.

When to consider this option

• You are in a lower tax bracket now than you are likely to be in later, including in retirement.
• You cannot contribute to a Roth IRA due to the income limits.
• You want tax diversity and flexibility in retirement, with a mix of taxable and tax-free income sources.

A SEP IRA is a simple and easy way to save for retirement. With separate accounts for each employee and higher annual limits than regular IRAs, a SEP IRA is a valuable benefit that can make a difference for your future.

Eligibility

Employees are generally eligible for a SEP IRA at age 21 and if they have worked for the employer in at least three of the last five years. They must also have received the minimum annual compensation ($800 for 2026).

An employer may use less restrictive requirements, but not more restrictive ones. Any eligibility rules must apply equally to all employees, including the employer. However, employers may exclude employees covered by a union agreement and those who are not U.S. residents and do not receive U.S. wages.

Annual limits

Employers can contribute up to 25% of the employee’s compensation, not to exceed the annual contribution limit ($72,000 for 2026). All employees, including the employer, must generally receive uniformly calculated contributions. The amount may vary from year to year and may be skipped based on financial circumstances.

Contributions to other retirement plans

If you have another retirement plan that allows individual contributions—such as a 403(b), 401(k) or IRA—you can contribute up the maximum on those plans since the limits are considered separate from SEP IRA employer contributions.

Catch-up contributions

SEP IRAs do not offer catch-up contributions.

While SEP IRAs are intended to help you save for retirement, there may be cases where you need access to your money sooner. Withdrawals are permitted at any time, but they may be subject to taxes and a tax penalty. The following rules apply to all withdrawals from traditional SEP IRAs and to withdrawals of earnings only for Roth SEP IRAs.

Withdrawals subject to tax (no additional 10% tax)

• Withdrawals at any age for disability, first-time home purchase (up to $10,000), qualified higher education expenses and health insurance premiums if unemployed, among other scenarios
• Any withdrawals once you turn age 59½
• Death

Withdrawals subject to tax (plus additional 10% tax)

• Any withdrawals prior to age 59½ that do not qualify for an exception (such as those listed above)

No loans are available

For specific questions regarding your situation, speak with a tax professional or contact your Corebridge financial professional. Reach out to us if you don’t have an assigned financial advisor.