A Merrill Edge SEP-IRA combines powerful self-employed retirement savings with the BofA Preferred Rewards program — your SEP-IRA balance counts toward your combined balance, potentially unlocking banking rewards unavailable at any other major broker. The 2026 contribution limit is $70,000 with no account minimum and $0 commissions.
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 Merrill Edge?
- $0 account minimum — open with any amount
- $0 commissions on stock and ETF trades
- SEP-IRA balance counts toward Preferred Rewards — unique to Merrill Edge
- BofA Global Research — institutional-quality equity research inside the SEP-IRA
- In-person support at Bank of America branches nationwide
Preferred Rewards: The Merrill Edge SEP-IRA’s Unique Advantage
For self-employed BofA customers, a large SEP-IRA contribution can move you to a higher Preferred Rewards tier:
| Tier | Combined Balance | BofA Card Bonus |
|---|---|---|
| Gold | $20,000+ | +25% cash rewards |
| Platinum | $50,000+ | +50% cash rewards |
| Platinum Honors | $100,000+ | +75% cash rewards |
Example: BofA customer with $30,000 in BofA savings. They open a Merrill Edge SEP-IRA and contribute $25,000 for 2026. Combined balance = $55,000 → Platinum tier unlocked. Their BofA Unlimited Cash Rewards card now earns 2.25% cashback on all purchases (vs 1.5% base) — worth hundreds annually.
No other broker creates this link between SEP-IRA contributions and banking rewards.
Investment Options Inside a Merrill Edge SEP-IRA
| Investment Type | Details |
|---|---|
| Stocks | $0 commission |
| ETFs (iShares, Vanguard, SPDR) | $0 commission |
| NTF mutual funds | $0 transaction fee for eligible funds |
| Bonds and CDs | Merrill fixed income marketplace |
| BofA Global Research | Analyst reports on 3,000+ stocks |
Note: Merrill Edge does not offer fractional shares. Whole share purchases only.
Tax Savings Example: Merrill Edge SEP-IRA in Action
Scenario: Self-employed consultant, married filing jointly, $180,000 net SE income, BofA Preferred Rewards customer:
- Approximate SEP contribution: $180,000 × 20% = $33,882
- Federal tax bracket: 24%
- Federal tax savings: $33,882 × 24% = $8,132
- SEP-IRA balance counts toward Preferred Rewards → moves to Platinum Honors tier
- Platinum Honors BofA card: 2.625% cashback on all purchases
- Extra rewards vs base rate: ~$200–$400/year depending on spending
- Invested in iShares ITOT (0.03% ER) for 25 years at 7% → $183,217
Merrill Edge SEP-IRA vs Solo 401(k)
Merrill Edge offers both SEP-IRA and Small Business 401(k) plans:
| SEP-IRA | Small Business 401(k) | |
|---|---|---|
| Max 2026 contribution | $70,000 | Up to $93,500 |
| Roth option | No | Yes |
| Employees | Yes (must cover at same %) | Yes (more plan options) |
| Setup | Simple | More complex |
The SEP-IRA is the simpler choice for sole proprietors. For business owners with employees who want more control over plan design, Merrill’s Small Business 401(k) offers more flexibility.
How to Open a Merrill Edge SEP-IRA
- Go to merrilledge.com → “Open Account” → “SEP-IRA”
- Enter your SSN or EIN and business information
- Sign the IRS Form 5305-SEP adoption agreement
- Link a Bank of America account (preferred) or external bank
- Contribute up to your 2026 limit by October 15, 2027 (with extension)
You can also open in-person at a Bank of America branch with a Merrill Edge financial solutions advisor.
Bottom Line
A Merrill Edge SEP-IRA is the right choice for self-employed Bank of America customers who want their retirement contributions to generate banking rewards. The Preferred Rewards program is a genuine differentiator — no other major broker offers rewards on SEP-IRA balances.
For non-BofA customers, Fidelity or Schwab offer marginally lower investment costs with no exit fee.
For the full Merrill Edge overview, see the Merrill Edge Review 2026.
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy