SEP vs Roth IRA: Which Retirement Plan Fits You Best?

Are you a federal or postal employee wondering how to make your retirement savings work smarter—not harder?
Then this breakdown of SEP vs Roth IRA is exactly what you need. These two retirement plans offer big benefits—but in very different ways. Choosing the right one could save you thousands, and set you up for a stronger financial future.

Let’s keep it simple. We’ll show you how these retirement tools work and which one fits best if you’re working for the government and planning ahead.

What Is a SEP IRA?

A SEP IRA (Simplified Employee Pension) is a type of retirement account often used by small business owners or people who are self-employed. If you’re a federal or postal worker with a side hustle, freelance income, or any 1099 work—this could be for you.

Quick Facts:

• Who it’s for: Self-employed individuals or small business owners.

• Contributions: Made by the employer—you, if you’re self-employed.

• Contribution limits (2024): Up to 25% of your earnings or $69,000, whichever is less.

• Taxes: Contributions are tax-deductible, but you’ll pay taxes when you take money out in retirement.

• RMDs: Yes—starting at age 73, you’re required to withdraw a minimum amount every year.

So if you’re earning extra income outside of your government job, this plan can help you save more—and reduce your taxes now.

What Is a Roth IRA?

A Roth IRA works differently. You contribute after-tax income—so you don’t get a tax break now—but your money grows tax-free. When you retire, qualified withdrawals are 100% tax-free.

Quick Facts:

• Who it’s for: Individuals with earned income under IRS limits.

• Contributions (2024): Up to $7,000—or $8,000 if you’re age 50 or older.

• Taxes: You pay taxes on the money now, but none later on qualified withdrawals.

• RMDs: None. You’re not forced to take money out in retirement.

Roth IRAs are great if you think you’ll be in a higher tax bracket later or want to enjoy tax-free income during retirement.

SEP vs Roth IRA: Side-by-Side

Why This Matters for Federal and Postal Employees

If you’re working in federal service, you probably already contribute to the Thrift Savings Plan (TSP). But here’s the truth—TSP alone may not be enough to meet your retirement goals. Having additional tools like a SEP or Roth IRA gives you more control and flexibility.

Consider a SEP IRA if:

• You have a side income (e.g., freelance writing, rideshare, consulting).

• You want to contribute more than what a Roth IRA allows.

• You want to reduce your taxable income now.

Consider a Roth IRA if:

• You want tax-free income later.

• You expect to earn more in the future or retire in a higher tax bracket.

• You like having control—no forced withdrawals.

Can You Have Both?

Yes, you can. If you qualify, you can contribute to both a SEP IRA and a Roth IRA. This strategy gives you:

• Immediate tax savings with the SEP IRA

• Future tax-free income with the Roth IRA

It’s a smart way to cover both sides—now and later. Just make sure you meet the income and contribution rules for each.

What to Do Next

1. Check Your Income Sources:
Do you have extra income outside your federal job? If yes, a SEP IRA might help.

2. Think About Your Taxes:
Want to lower taxes now? Go SEP. Want tax-free money later? Go Roth.

3. Know You’re Not Alone:
At The Benefit Coordinators, we help federal and postal workers figure this stuff out every day. We’re here to help you plan—not stress—about retirement.

Final Thoughts

When it comes to SEP vs Roth IRA, there’s no “one-size-fits-all” answer. But there is a right answer for you—and your goals.

You’ve worked hard serving the public. You deserve a retirement strategy that works just as hard for you.

If you’re ready to find out what that looks like, we’re here to help. Visit The Benefit Coordinators to explore your retirement options and connect with someone who truly understands your needs.