.svg)
If you own the business, no one is quietly building your retirement for you. There is no HR department setting up a plan, no employer match landing in an account each month. It is you, the work, and a tax bill that grows in the good years. Most owners feel that and assume the fix is complicated. For a lot of them, it is not. It is a SEP IRA, and most have never had it explained in plain terms.
SEP stands for Simplified Employee Pension. Skip the formal name and here is the plain version: it is a retirement account built for self-employed people and small business owners. Sole proprietors, single-member LLCs, partnerships, S-corps, freelancers with a side income. If you have business income, it is on the table.
The word that matters is simplified. Next to a full company 401(k), a SEP is light. The setup paperwork is short, there is usually no annual government filing, and the cost to run one is low. For a one-person business it can be close to effortless. That is the design. A small operation gets a big-plan ceiling without the big-plan workload.
A regular IRA caps at $7,500 for 2026, or $8,600 if you are 50 or older. Useful, but small if you are trying to make up for years when the business absorbed every spare dollar.
A SEP for 2026 lets the business set aside up to 25% of compensation, to a ceiling of $72,000 per person. The lower of the two figures applies. For 2025 the ceiling was $70,000. That is roughly ten times the regular IRA limit. If you are self-employed and paying yourself through net earnings rather than a W-2 salary, the math tends to land near 20% of net income, because of how self-employment tax factors in. The compensation that counts is also capped, at $360,000 for 2026.
Here is the feature that matches how a business actually runs. You are not locked into a number. Each year the business decides whether to contribute at all, anywhere from zero up to the limit. Strong year, you can fund it heavily. Lean year, you can put in little or nothing, with no penalty for sitting out. For income that swings, that on-off control is the appeal.
The timing helps too. You can fund a SEP for a tax year right up to your business filing deadline, including extensions. In practice that can be as late as October of the following year. You see your real profit first, then decide how much to set aside. Few accounts let you look at the scoreboard before you place the bet.
A SEP is funded by the business, not by paycheck deferrals the way a 401(k) is. The business makes the contribution and it lands in a SEP account that belongs to the individual. When you are the business, that is still your money. It simply travels a different route to get there.
If you have a team, read this part twice. Whatever percentage you contribute for yourself, you generally contribute that same percentage for every eligible employee. Put 15% away for yourself and you are putting 15% away for them. The plan is built to be even-handed, so the owner's account cannot be stacked while everyone else is skipped. You do set the eligibility gate within limits: you can require that someone be at least 21, have worked for you in 3 of the last 5 years, and earned at least $800 in 2026. You can be more generous than that, never stricter.
Everything above is true of any SEP. The self-directed version changes one thing: what the account is allowed to hold. Open a SEP at a typical brokerage and it usually holds one menu of publicly traded products. A self-directed SEP widens that menu. The account can hold alternative assets you understand from your own world, such as real estate, promissory notes, private placements, and precious metals.
Mountain West IRA is the Administrator and record-keeper for that account. That is a specific role. We hold and administer the account and keep the records straight so the paperwork stands up. We are not an advisor and not a broker. We do not pick assets or tell anyone what to hold. The direction comes from the account holder.
The freedom of a self-directed account comes with hard lines called prohibited transactions. Cross one and the tax consequences can be severe, sometimes severe enough to disqualify the account. The core idea is that the account operates at arm's length from you and your close family, the people the IRS calls disqualified persons: you, your spouse, your parents, your children, and their spouses.
None of this is meant to scare anyone off. It is meant to keep you on the right side of a line that is easy to honor once you know it exists. When something is unclear, the move is to ask first, with your own tax or legal advisor and your Administrator, rather than fix it after.
Who can open a SEP IRA?
Self-employed people and small business owners, from sole proprietors up through corporations. If you have business income, you can generally look at one.
How much can I put in for 2026?
Up to 25% of compensation, to a ceiling of $72,000 per person, with the lower figure applying. Self-employed owners paying through net earnings tend to land around 20% of net.
Do I have to contribute every year?
No. The business chooses each year, from zero up to the limit. That flexibility is one of the main reasons owners with uneven income like it.
Can a SEP IRA hold real estate?
A self-directed SEP can hold alternative assets such as real estate, promissory notes, private placements, and precious metals, subject to the prohibited-transaction rules. What you choose is your decision, made with your own advisor.
What is the deadline to fund it?
You can generally fund a SEP for a tax year up to your business filing deadline, including extensions, which can be as late as October of the following year.
What does Mountain West IRA do?
We are the Administrator and record-keeper. We hold and administer the account and keep the records correct. We do not give investment, tax, or legal advice, and we do not recommend specific assets.
---
To keep learning, visit our educational videos library on YouTube: https://www.youtube.com/@MountainWestIRA/videos
Ready to take more control of your retirement?
Mountain West IRA can help you open a Self-Directed IRA or Solo 401(k), so you can invest in what you know best.
📞 Call us at 866-377-3311
📅 Schedule your free consultation: https://outlook.office365.com/book/MountainWestIRA@mwira.com/?imsaljsauthenabled=true
You can explore our educational content on our YouTube channel and visit our blogs.
https://www.youtube.com/@MountainWestIRA & https://www.mountainwestira.com/blog
If this topic sparked questions, reach out to our team. We are here to help you understand the rules, the process, and how self-directed retirement accounts work.
Not investment, tax, or legal advice. Check with your own financial advisor about your specific situation.
This post is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized advice.
Mountain West IRA, Inc. does not render tax, legal, accounting, investment, or other professional advice. If accounting, tax, legal, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
Meet with our team to explore your personalized journey of building wealth through investing in real estate, promissory notes, precious metals, and other assets using your retirement fund.
Schedule A Consultation
