SEP IRA Projection Calculator
Project SEP IRA balance for self-employed individuals.
What this calculator does
This calculator projects a SEP IRA balance to retirement for self-employed savers and small business owners. Enter your age, retirement age, income, contribution rate, current balance and expected return, and it projects the account forward with a year-by-year table separating what you contributed from what the market added.
SEP IRAs occupy a specific niche: very high contribution ceilings, almost no administrative burden, and a filing-deadline funding window that lets you decide after the year has ended. What they lack is employee deferrals and catch-up contributions, which is why the projection is worth comparing against a solo 401(k) before you commit.
When to use it
The most valuable moment is in the spring, when your profit for the prior year is known and the contribution window is still open. Running the projection then converts an abstract tax deduction into a retirement-age balance, which makes a large discretionary contribution considerably easier to justify.
It is also the tool for the plan selection decision. Self-employed income is rarely steady, so projecting a SEP funded at a realistic average rate, rather than the maximum in a good year, gives a more honest picture. And if you are approaching 50, the absence of catch-up contributions is a real cost this projection makes visible.
Understanding the inputs
Enter annual salary as net self-employment profit if you are a sole proprietor, or W-2 wages if you operate through an S corporation, because the contribution base differs between them. Your contribution percentage should be the effective rate you will actually achieve: 20 percent is the practical ceiling for a sole proprietor, not 25.
The employer match field is redundant for a genuine SEP, since all contributions are employer contributions. Leave it at zero and put the whole figure in your contribution rate. Expected return should be net of fund expenses; a self-directed SEP at a low-cost brokerage typically has far cheaper options than a small employer 401(k).
How is this calculated?
SEP IRAs allow up to 25% of net self-employment income to be contributed pre-tax.
A worked example
A 40-year-old sole proprietor with $120,000 of net profit deducts half of self-employment tax, leaving net earnings of about $111,500. Twenty percent of that is roughly $22,300, or $1,858 a month, comfortably under the $70,000 cap. With $60,000 already in the account and a 7 percent return, the balance reaches about $1,849,000 by age 65.
The tax effect alongside it is substantial: at a 24 percent marginal rate, that $22,300 contribution reduces the current year's federal tax by roughly $5,350. The trade-off is that every dollar comes back as ordinary income later, and required minimum distributions begin at 73.
Limitations and assumptions
This is a projection under fixed assumptions rather than a prediction. It applies one constant return and one constant income across the whole period, which is a particularly strong assumption for self-employed earnings that typically swing year to year. Sequence-of-returns risk means the actual balance could differ significantly even if the average return holds.
It also does not apply the $70,000 annual cap, does not perform the net-earnings calculation for you, ignores catch-up ineligibility, excludes the cost of contributing on behalf of employees, and takes no account of income tax on withdrawals or required minimum distributions from 73. Confirm the deductible amount with your tax preparer before funding.
Common Questions
- How much can I contribute to a SEP IRA?
- Up to 25 percent of compensation, capped at $70,000 for 2025. For the self-employed the effective figure is closer to 20 percent of net profit, because the 25 percent is applied to net earnings after deducting half your self-employment tax and the contribution itself. That distinction trips up most first-time filers.
- Why does my accountant say 20 percent, not 25?
- Because the base differs. An incorporated owner contributes 25 percent of W-2 wages. A sole proprietor contributes 25 percent of net earnings after the contribution is subtracted, which is arithmetically equivalent to 20 percent of pre-contribution net earnings. On $120,000 of net profit that works out at roughly $22,300.
- When is the deadline?
- Unusually late, which is the SEP's main practical advantage. You can open and fund a SEP IRA right up to your tax filing deadline including extensions, so as late as October 15 for the previous tax year. That lets you size the contribution once you know your actual profit.
- Are there catch-up contributions after 50?
- No. SEP IRAs are funded entirely by employer contributions, and catch-up provisions apply only to employee deferrals. This is a genuine drawback for older self-employed savers, and one of the strongest arguments for a solo 401(k), which does allow a $7,500 catch-up from age 50.
- Should I use a solo 401(k) instead?
- Often yes, if you have no employees. A solo 401(k) allows a $23,500 employee deferral plus roughly 20 to 25 percent employer contribution, so at lower incomes it shelters far more. At $80,000 of net profit a SEP allows around $15,000 while a solo 401(k) allows well over $38,000.
- What if I have employees?
- You must contribute the same percentage of compensation for every eligible employee as you do for yourself, and you cannot exclude yourself from that rule. Eligibility generally means age 21, three of the last five years of service, and $750 in compensation. That uniformity requirement makes SEPs expensive once you have staff.
- Can I contribute in a bad year?
- You can skip it entirely. SEP contributions are discretionary year to year, which suits businesses with volatile income far better than a plan requiring consistent funding. The flexibility is real, but so is the risk of skipping so often that the account never builds.
- Is there a Roth version?
- SECURE 2.0 permits Roth SEP contributions, but provider support has been slow to arrive and many custodians still do not offer it. Traditional SEP contributions remain the default: deductible now, taxed on withdrawal, and subject to required minimum distributions from age 73.
- Can I also fund a regular IRA?
- Yes. A SEP does not use up your $7,000 personal IRA limit, though being covered by a workplace plan, which a SEP counts as, can phase out the deductibility of a Traditional IRA contribution at higher incomes. A Roth IRA remains available subject to its own income limits.