SEP-IRA
A simple, employer-funded retirement plan for self-employed people and small businesses.
A SEP-IRA (Simplified Employee Pension) is funded entirely by the employer, which for a self-employed person means by you, out of business income. Contributions are capped at a percentage of compensation up to an annual dollar limit, are deductible to the business, and grow tax-deferred like a traditional IRA.
Its appeal is administrative simplicity: minimal paperwork, no annual filing in most cases, and the contribution can be decided after the year ends, which suits income that varies. The constraint is that if you have eligible employees you must contribute the same percentage of compensation for them as for yourself, which makes it expensive as soon as a business has staff.
For a one-person business with strong profit, a solo 401(k) often allows a larger total contribution at the same income because it adds an employee deferral on top of the employer piece. The SEP-IRA is usually the better fit when simplicity matters more than maximum contribution room, or when the plan is being set up late.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.