An E*TRADE SEP-IRA provides self-employed investors and small business owners with tax-deferred retirement savings at $0 cost to open. The 2026 contribution limit is $70,000 with no minimum deposit and $0 commissions on stocks and ETFs. ETRADE’s full brokerage platform — including Power ETRADE tools and 4,000+ no-transaction-fee mutual funds — is available inside the SEP-IRA.
What Is a SEP-IRA?
A SEP-IRA (Simplified Employee Pension Individual Retirement Account) is a retirement account designed for self-employed individuals, freelancers, sole proprietors, and small business owners. Contributions are made by the employer (which is you, if self-employed) and are tax-deductible.
2026 SEP-IRA Contribution Limits
| Detail | Amount |
|---|---|
| Maximum contribution | $70,000 |
| Percentage limit (W-2 employees) | 25% of compensation |
| Effective rate (self-employed) | ~20% of net self-employment income |
| Catch-up contribution (age 50+) | None — SEP-IRAs have no catch-up |
| Contribution deadline | Tax filing deadline + extensions (Oct 15, 2027) |
| Source | IRS Notice 2025-82 |
How to Calculate Your SEP-IRA Contribution (Self-Employed)
The IRS requires a two-step adjustment for self-employed taxpayers:
- Subtract half of self-employment tax from net self-employment income
- Multiply by 20% (the self-employed equivalent of the 25% W-2 rate)
Worked example — freelancer earning $150,000 net:
- Half of SE tax: $150,000 × 7.65% = $11,475
- Adjusted net SE income: $150,000 − $11,475 = $138,525
- SEP contribution: $138,525 × 20% ≈ $27,705
| Net SE Income | Approximate SEP Contribution (20%) |
|---|---|
| $50,000 | ~$9,293 |
| $100,000 | ~$18,587 |
| $150,000 | ~$27,705 |
| $200,000 | ~$36,941 |
| $280,000+ | $70,000 (maximum) |
Exact figures depend on SE tax calculation. Consult a tax professional for your specific situation.
SEP-IRA vs Solo 401(k): Which Is Better?
| Feature | SEP-IRA | Solo 401(k) |
|---|---|---|
| Contribution limit (2026) | $70,000 | $70,000 + $23,500 employee salary deferral |
| Catch-up (age 50+) | None | $7,500 additional salary deferral |
| Roth option | Limited (SECURE 2.0 allows Roth SEP) | Yes (Roth Solo 401k) |
| Employees allowed | Yes, but must cover them | No (you + spouse only) |
| Setup complexity | Very simple | More complex |
| IRS filing required | No (under $250,000) | Form 5500-EZ (over $250,000) |
Key insight: If you’re self-employed with no employees and want to maximize contributions, a Solo 401(k) generally allows higher total contributions because you can make both employee salary deferrals ($23,500 in 2026) AND employer profit-sharing contributions (up to 25% of compensation). A SEP-IRA allows only the employer portion.
For simplicity with employees, or when just getting started, a SEP-IRA is often the easier first step.
SEP-IRA Tax Benefits
- Contributions are tax-deductible — reduce your adjusted gross income
- Growth is tax-deferred — no taxes on dividends, interest, or capital gains inside the account until withdrawal
- Withdrawals in retirement are taxed as ordinary income
- Required Minimum Distributions begin at age 73 (same as Traditional IRA)
- No income limit — SEP-IRA contributions are not phased out at any income level
Deadline Flexibility: A Key SEP-IRA Advantage
Unlike a 401(k) which must be established by December 31, a SEP-IRA can be opened and funded as late as your tax filing deadline including extensions.
For 2026 contributions:
- Standard deadline: April 15, 2027
- With extension: October 15, 2027
This means you can file a tax extension, evaluate your 2026 earnings in September, calculate your optimal SEP contribution, and still make the 2026 contribution — one of the most flexible retirement account rules for small business owners.
Why Open a SEP-IRA at E*TRADE?
- $0 account minimum — no minimum deposit to open
- $0 commissions on stocks and ETF trades
- 4,000+ NTF mutual funds — broad fund selection inside the SEP-IRA
- Power E*TRADE tools — advanced charting and options available in the same account as your SEP-IRA grows
- Dollar-based investing — invest fractional amounts in S&P 500 stocks
Investment Options Inside an E*TRADE SEP-IRA
| Investment Type | Details |
|---|---|
| ETFs (iShares, Vanguard, SPDR) | $0 commission |
| Individual stocks | $0 commission, dollar-based fractional (S&P 500) |
| NTF mutual funds | 4,000+ no-transaction-fee funds |
| Bonds and CDs | E*TRADE fixed income marketplace |
| Options | $0.65/contract (requires approval) |
Tax Savings Example: E*TRADE SEP-IRA in Action
Scenario: Self-employed developer, single, $160,000 net SE income, 2026:
- Approximate SEP contribution: $160,000 × 20% = $29,734 (after SE tax adj.)
- Federal tax bracket: 32%
- Federal tax savings: $29,734 × 32% = $9,515
- Invested in VTI ETF at 0.03% ER for 20 years at 7% → $114,987
E*TRADE SEP-IRA vs Solo 401(k)
E*TRADE also offers a Solo 401(k) (Individual 401(k)) for self-employed investors:
| SEP-IRA | Solo 401(k) | |
|---|---|---|
| Max 2026 contribution | $70,000 | Up to $93,500 (with salary deferral) |
| Roth option | No | Yes |
| Employees | Yes (must cover) | No |
| Setup | Simple online | More paperwork |
For solo operators looking to maximize contributions beyond what a SEP-IRA allows, E*TRADE’s Individual 401(k) offers both traditional and Roth options.
How to Open an E*TRADE SEP-IRA
- Go to etrade.com → “Open an Account” → “IRA” → “SEP-IRA”
- Enter your Social Security number (or EIN) and business information
- Complete the IRS Form 5305-SEP adoption agreement
- Link your business checking account
- Make contributions up to your 2026 limit by October 15, 2027 (with extension)
Managing Employees in an E*TRADE SEP-IRA
If you have eligible employees, E*TRADE can establish SEP-IRA accounts for each one. All eligible employees must receive contributions at the same percentage of compensation as you contribute to your own account.
Bottom Line
An E*TRADE SEP-IRA is a solid choice for self-employed investors who want a well-established platform with broad investment options and $0 commissions. The platform grows with you — from index ETF investing to more active strategies as your portfolio and experience develop.
For the full E*TRADE overview, see the E*TRADE Review 2026.
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