SEP IRA vs Roth IRA: What Is Better For You

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding SEP IRA and Roth IRA

Eligibility and Contributions


A Simplified Employee Pension (SEP) IRA is tailored for self-employed individuals and small business owners. Only employers can make contributions that are tax-deductible. This plan allows significant contributions, up to 25% of an employee’s compensation, with a maximum limit of $69,000 for 2024. This feature is beneficial for business owners looking to maximize their retirement savings while enjoying tax benefits.

Roth IRA

Roth IRAs are available to individuals with earned income within specific limits. Contributions are made with post-tax dollars, meaning you don’t get a tax break upfront, but qualified withdrawals during retirement are tax-free. The contribution limit for 2024 is $7,000, with an additional $1,000 catch-up contribution for those aged 50 and older. This plan is ideal for individuals expecting to be in a higher tax bracket during retirement.

Tax Treatment


Contributions to a SEP IRA are tax-deductible, reducing your taxable income in the year they are made. However, withdrawals during retirement are taxed as ordinary income. This can be advantageous if you anticipate being in a lower tax bracket after retiring.

Roth IRA

Roth IRAs offer tax-free growth and tax-free withdrawals in retirement. Since contributions are made with after-tax dollars, you won’t owe taxes on the earnings, provided you follow the rules. This can be particularly beneficial if you expect your retirement tax rate to be higher.

Withdrawal Rules


Early withdrawals before age 59½ incur a 10% penalty in addition to regular income tax. Required Minimum Distributions (RMDs) must begin at age 73. This can impact your retirement planning, especially if you wish to leave your savings to grow longer.

Roth IRA

Roth IRAs allow you to withdraw contributions anytime, tax-free and penalty-free. Earnings can also be withdrawn tax-free, provided the account is at least five years old, and you are over 59½. Notably, Roth IRAs do not have RMDs, making them a flexible option for managing retirement income.

Sep Ira Vs Roth Ira

How We Can Help

At The Annuity Expert, we understand the complexities of retirement planning and are here to guide you every step of the way. As an insurance agency, annuity broker, and retirement planner with over 15 years of experience, we specialize in finding the best solutions at the lowest costs.

Many individuals struggle with deciding between SEP IRAs and Roth IRAs, often feeling overwhelmed by the tax implications and contribution limits. We recognize the emotional toll this uncertainty can take, impacting your confidence in securing a comfortable retirement. By working with us, you benefit from our expertise and commitment to your financial well-being.

Sep Ira Vs Roth Ira

What We Recommend

Step 1: Initial Consultation

Contact us for a free consultation. We’ll assess your current financial situation and retirement goals during this session. The main benefit is a personalized retirement plan tailored to your needs.

Step 2: Customized Retirement Strategy

Based on our initial consultation, we will develop a comprehensive retirement strategy. This includes detailed comparisons of SEP and Roth IRAs, highlighting which option best aligns with your financial objectives. The main benefit is a clear, actionable plan designed to maximize your retirement savings.

Step 3: Implementation and Ongoing Support

We’ll assist you in setting up your chosen retirement accounts and provide ongoing support to ensure your plan adapts to any changes in your financial situation or goals. The main benefit is peace of mind, knowing your retirement strategy is managed by experts.

Features and Benefits

  • Expert Advice: Benefit from our extensive knowledge and experience.
  • Personalized Plans: Tailored strategies to meet your unique retirement goals.
  • Ongoing Support: Continuous guidance to adapt to financial changes.

Addressing Common Objections

Some may worry about the complexity of retirement accounts. We simplify the process, making it easy to understand and manage. Others may hesitate due to potential costs, but we ensure our services provide excellent value and cost-effectiveness.

Without expert guidance, you risk making uninformed decisions that could jeopardize your retirement savings. Conversely, by partnering with us, you’ll experience confidence and security, knowing your retirement is in capable hands.

For personalized advice and to get started on optimizing your retirement strategy, contact us today for a free quote or consultation.

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Frequently Asked Questions

Does a SEP IRA reduce self-employment tax?

Contributing to your employees’ SEP IRA can lead to tax benefits for self-employed individuals and small business owners. For the former, both income tax and self-employment tax can be reduced; for the latter, income tax is lower, and contributions are exempt from Medicare and Social Security taxes.

At what age does a Roth IRA not make sense?

It’s a good idea to consider opening a Roth IRA regardless of your age. If you decide to open one later in life, you can avoid the early withdrawal penalty if you reach 59½ years old. Just remember that regardless of when you open the account, you’ll need to wait five years before being able to withdraw the earnings without paying taxes.

Can I transfer money from a SEP IRA to a traditional IRA?

Yes. The main distinction is that an employer can contribute to a SEP IRA, whereas only individuals can contribute to a traditional IRA. Therefore, you can merge a SEP IRA with a traditional IRA without consequences other than determining who can contribute.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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