SEP-IRA (Simplified Employee Pension Plan)
Simplified Employee Pension (SEP) plans have gained popularity due to their cost-effectiveness and flexibility. Explore what a SEP plan is, what you can trade & invest in it, and how to open a SEP-IRA at tastytrade.
What is a Simplified Employee Pension Plan (SEP-IRA)?
A Simplified Employee Pension plan, or SEP-IRA, is a type of individual retirement account (IRA). The plan allows employers, including self-employed individuals, to set aside funds in retirement accounts for themselves or their workers. If you are not a business owner or a self-employed person, then you cannot independently establish a SEP-IRA or make contributions to one.
They are attractive options due to their low start-up and operating costs compared to conventional retirement plans for employers. One of the key advantages of SEP plans is that they allow employers to contribute up to 25% of employee compensation. The contribution limit is also higher than a traditional or Roth IRA.
What Can I Trade and Invest in with a SEP-IRA?
When it comes to trading in your tastytrade IRA, there are numerous strategic options at your disposal. With IRA The Works you can trade stocks, options, futures, and options on futures.
| IRA The Works (limited margin) | Basic IRA (limited margin) | Limited / Cash* | |
|---|---|---|---|
Buy stock |  | | |
Short sell stock | - | - | - |
Buy options | | | |
Sell covered calls | | | |
Sell cash-secured puts | | | |
Defined-risk options spreads | | | - |
Sell naked puts | - | - | - |
Sell naked calls** | | - | - |
Futures^ | | - | - |
Cryptocurrencies | - | - | - |
| IRA The Works (limited margin) | |
|---|---|
Buy stock | |
Short sell stock | - |
Buy options | |
Sell covered calls | |
Sell cash-secured puts | |
Defined-risk options spreads | |
Sell naked puts | - |
Sell naked calls** | |
Futures^ | |
Cryptocurrencies | - |
| Basic IRA (limited margin) | |
|---|---|
Buy stock | |
Short sell stock | - |
Buy options | |
Sell covered calls | |
Sell cash-secured puts | |
Defined-risk options spreads | |
Sell naked puts | - |
Sell naked calls** | - |
Futures^ | - |
Cryptocurrencies | - |
| Limited / Cash* | |
|---|---|
Buy stock | |
Short sell stock | - |
Buy options | |
Sell covered calls | |
Sell cash-secured puts | |
Defined-risk options spreads | - |
Sell naked puts | - |
Sell naked calls** | - |
Futures^ | - |
Cryptocurrencies | - |
* By default, IRAs are provisioned to have margin relief, which allows for defined risk spread trading. However, if you wish to provision your IRA as a cash account instead, please write to accounts@tastytrade.com.
** To trade an uncovered call in an IRA, The Works trading level is required. Additionally, the IRA must have a start of the day net liquidation value of $25,000, and the higher margin requirement is held when compared to a non-retirement account with the Works. Please see here for more detail.
^ Your account must qualify for IRA The Works to apply for futures trading. Learn more about CME futures products.
How Can I Open a SEP-IRA?
SEP plans can be opened by a business of any size, including self-employed individuals. Smaller companies tend to use SEP-IRAs more often than larger companies. Most SEP plans require you to contribute based on the same percentage of salary to every employee participating in the plan.
Like our other IRAs, opening a SEP-IRA is easy at tastytrade. The requirements are essentially the same as any IRA. After meeting the SEP-IRA qualifications listed above, you’ll need a social security number, to be a U.S. resident, and to have qualified income.
It is important to be mindful of your tax situation, as it is on the individual to comply with IRS requirements.
FAQs
A Simplified Employee Pension plan is a type of individual retirement account (IRA). The plan allows employers, including self-employed individuals, to set aside funds in retirement accounts for themselves or their workers.
One of the key features of a SEP plan is that it allows you to contribute 25% of your compensation, limited to $70,000 in 2025. It is also important to keep in mind that catch-up contributions—allowed in other IRA types—are not permissible with SEP plans. See our contribution limit help article for more information.
Like any retirement plan, SEPs come with pros and cons. They are relatively easy to set up and have low administrative costs. They also offer flexible annual contributions for the same calendar year, making it a good plan if cash flow is an issue. However, in most cases, retirement accounts cannot be withdrawn from without penalty until accountholders reach the qualified age for withdrawal.
This plan allows employers, including self-employed individuals, to set aside funds in retirement accounts for themselves or their workers. If you are not a business owner or a self-employed person, then you cannot independently establish a SEP-IRA or make contributions to one.
SEP plans can be a great way to invest for self-employed workers or small business owners. tastytrade makes it easy to open a SEP IRA and take control of your investments.
All investments involve risk of loss. Please carefully consider the risks associated with your investments and if such trading is suitable for you before deciding to trade certain products or strategies. You are solely responsible for making your investment and trading decisions and for evaluating the risks associated with your investments.