A Charles Schwab SEP-IRA provides one of the most accessible retirement savings options for self-employed investors and small business owners. The 2026 contribution limit is $70,000 with no minimum to open, $0 commissions, and access to Schwab’s index funds starting at 0.02% expense ratio.

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:

  1. Subtract half of self-employment tax from net self-employment income
  2. 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 Schwab?

  • $0 account minimum — open with any amount
  • $0 commissions on stock and ETF trades
  • Schwab index mutual funds — SWPPX (S&P 500) at 0.02% ER, $1 minimum
  • Schwab Stock Slices — fractional investing in S&P 500 stocks from $5
  • 24/7 customer service and 400+ branch locations nationwide
  • Online SEP-IRA setup — complete in about 10 minutes

Investment Options Inside a Schwab SEP-IRA

Investment Type Details
Schwab index mutual funds SWPPX (0.02%), SWISX (0.06%), SWSSX (0.03%) — $1 min
Schwab ETFs (SCHB, SCHF, SCHZ) Low-cost, $0 commission
iShares/Vanguard ETFs $0 commission
Individual stocks $0 commission, Stock Slices for S&P 500
NTF mutual funds 4,000+ no-transaction-fee funds
Bonds and CDs Schwab fixed income marketplace

Tax Savings Example: Schwab SEP-IRA in Action

Scenario: Self-employed consultant, married filing jointly, $200,000 net self-employment income, 2026:

  • Approximate SEP contribution: $200,000 × 20% = $36,941 (after SE tax adj.)
  • Federal tax bracket: 24%
  • Federal tax savings: $36,941 × 24% = $8,866
  • Invested in SWPPX (0.02% ER) for 25 years at 7% → $199,885

Schwab SEP-IRA vs Schwab Solo 401(k)

Schwab offers both a SEP-IRA and a Solo 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 employees allowed
Annual IRS filing No (under $250,000) Form 5500-EZ (over $250,000)
Setup simplicity Very simple More complex

For sole proprietors without employees maximizing retirement savings, the Schwab Solo 401(k) typically allows more total contributions via the employee salary deferral ($23,500 for 2026, $31,000 if age 50+). The SEP-IRA is simpler and works well for most self-employed savers.

How to Open a Schwab SEP-IRA

  1. Go to schwab.com → “Open an Account” → “IRA” → “SEP-IRA”
  2. Enter your Social Security number (or EIN) and business information
  3. Sign the IRS Form 5305-SEP adoption agreement (Schwab provides)
  4. Link your business checking account
  5. Contribute up to your 2026 limit by October 15, 2027 (with extension)

Schwab’s online application takes about 10 minutes. Customer service is available 24/7 to assist with SEP plan setup questions.

Managing Employees in a Schwab SEP-IRA

Eligible employees (21+, worked 3 of past 5 years, earned $750+) must receive the same percentage contribution as you. Schwab can open SEP-IRA accounts for each eligible employee at no charge.

Bottom Line

A Schwab SEP-IRA is an excellent choice for self-employed investors and small business owners who want $0 commissions, low-cost index funds, and the backing of one of the largest and most trusted brokerages in the US.

For the full Schwab overview, see the Charles Schwab Review 2026. For the general IRA comparison, see the Schwab IRA guide.

WealthVieu
Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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