How to Use a Self-Directed SEP IRA

Self-Directed SEP IRA Investing: Benefits You Need to Know

Are you a small business owner looking for a retirement savings account that provides flexibility and control over your investments? A Self-Directed Simplified Employee Pension (SEP) IRA may be the solution you’re looking for. In this post, we’ll discuss the benefits of Self-Directed SEP IRA investing and how it can help you achieve your retirement goals.

What is a Self-Directed SEP IRA?

A Self-Directed SEP IRA is a type of retirement savings account available to small business owners and self-employed individuals. SEP IRAs work similarly to Traditional IRAs but have higher contribution limits. This makes them a great option for those who want to save more for retirement. With a Self-Directed SEP IRA, you have the ability to choose your own investments, including alternative investments that are not available through traditional IRA providers.

Benefits of Self-Directed SEP IRA Investing

First, higher contribution limits. One of the most significant benefits of a Self-Directed SEP IRA is the higher contribution limit. As of 2023, depending on your situation, you can contribute up to 25% of your net income, or $66,000, whichever is less. (Note: consult the IRS website for more information about this, as things may change from 2023 and beyond.) This is significantly higher than the contribution limit for Traditional or Roth IRAs, which is $6,000 or $7,000 for those over 50—again, subject to change.

Then there are the tax benefits to consider. Like other retirement savings accounts, a Self-Directed SEP IRA provides tax benefits. Contributions made to a Self-Directed SEP IRA are tax-deductible, which means you can reduce your taxable income and potentially lower your tax bill. Additionally, any earnings on your investments grow tax-deferred, meaning you won’t owe taxes on those earnings until you withdraw them in retirement.

Flexibility and Control

Additionally, consider the investment flexibility you’ll have with a SEP IRA. With a Self-Directed SEP IRA, you have the ability to invest in a wide range of assets, including stocks, bonds, mutual funds, and alternative investments like real estate or private equity. This flexibility allows you to choose investments that align with your personal values and investment goals. You can even invest in your own business or a business you are involved in, making a Self-Directed SEP IRA a great tool for small business owners.

Finally, remember you’ll have more control over your investments. One of the most significant benefits of a Self-Directed SEP IRA is the ability to have control over your investments. Unlike traditional IRAs, where your investment options are limited to those offered by the provider, a Self-Directed SEP IRA allows you to choose the investments that are right for you. This gives you more control over your investment decisions and can potentially lead to higher returns.

Who is a Self-Directed SEP IRA Right For?

Because Self-Directed SEP IRAs are appropriate for business owners, they’re popular among solopreneurs. SEP IRAs may require that you make the same contributions to employees across the company. However, when you run a company of one, this isn’t difficult to do. You can simply make contributions to the SEP IRA, leveraging a higher income (if you have one) with its higher contribution limits. Many entrepreneurs who find themselves looking at more freedom thanks to their business. These entrepreneurs also find that the SEP IRA is a powerful way to invest in retirement because of these high contribution limits.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guide or visit us online at