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All You Need To Know About a Vanguard Simple IRA and Sep IRA Plan in 2023

Retirement accounts, when properly managed, can be the best way to secure your financial future.

However, there are so many options available for you to invest your retirement savings that choosing the best retirement plan can be a difficult task.

There are so many things you have to consider. A small business retirement plan, for example, will be great for small business owners but may not be suitable for self-employed individuals or people earning a freelance income.

On top of that, many retirement account options have restrictive eligibility rules that can, for example, prevent self-employed professionals from accessing certain retirement benefits that are available to regular employees.

This is why before settling on a particular individual retirement account, you need to seek the help of a financial advisor.

In that regard, Vanguard personal advisor services can help any individual trying to set up the best retirement plan for their needs.

What Is a Vanguard Simple IRA?

Vanguard Simple IRA

The term SIMPLE IRA stands for Savings Incentive Match Plan for Employees. It can best be described as a retirement plan option available to small businesses, which allows employees and employers to make tax-deferred contributions to the account.

What is a Vanguard SEP IRA?

When we talk of a Vanguard SEP IRA plan we mean a Simplified Employee Pension. a SEP IRA allows businesses to make contributions to traditional IRA accounts of eligible employees.

Unlike Simple IRAs which have less restrictive eligibility rules, SEP IRAs only allow contributions from the business owners and not the employees themselves.

A SEP IRA does come with some tax benefits that may make it an attractive option for small businesses looking for a way to provide a good retirement savings plan for employees.

Who Can Participate in Such a Retirement Plan?

The following are eligible to open a Vanguard SEP IRA (Simplified Employee Pension) or a Simple IRA:

  • Small business owners

  • Self-employed individuals

  • Any business with less than 100 employees (but more than one person) and currently without an alternative retirement savings account

Employer Contributions vs. Employee Contribution Limits

Whether you choose a SEP IRA or a Simple IRA, there are certain limits on employee and employer contributions that you have to consider, such as the following:

  • In 2023, employees are now allowed to contribute up to $15,500 for the entire tax year while those aged 50 and older can increase that contribution limit up to $19,000

  • Employer contribution limits can allow a dollar-for-dollar match of whatever the employees contribute up to at least 3% of whatever compensation the employee gets

  • If employees are earning not more than $330,000 per year in 2023, the employer can contribute up to 2% of the employee’s compensation

  • All contributions for a SEP IRA and Simple IRA are tax deductible and need to be made each year

Investing in Vanguard Mutual Funds

When you choose a financial institution such as Vanguard, you will have access to many investment options, such as putting your money into Vanguard mutual funds.

As far as paper assets go, mutual funds are very reliable and can be quite profitable when handled by those with experience investing in a SEP IRA account.

Vanguard Mutual Fund Choices

Besides the popular low-cost Admiral shares, there are more than 100 Vanguard mutual funds that you can choose from for your SEP IRA account, such as:

  • VCAIX – California Intermediate-Term Tax-Exempt Fund Investor Shares

  • VBIAX – Balanced Index Fund Admiral Shares

  • VBPIX – Baillie Gifford Global Positive Impact Stock Fund Investor Shares

  • VFIAX – 500 Index Fund Admiral Shares

Eligible Employees

There are very few restrictions regarding who is eligible for a Vanguard SEP IRA or Simple IRA account.

An employee, for example, that has earned at least $5,000 in compensation for the last two years and has a reasonable expectation of earning at least that same amount in the current year will qualify for a SEP IRA.


The great thing about opening a Vanguard SEP IRA or Simple IRA is that there are no fees for opening the account.

You will only be required to pay $25 per annum for each Simple or SEP IRA that you have. As a perk for customers, Vanguard will waive that annual fee if there is more than $50,000 worth of specific Vanguard assets.

Account Maintenance

With retirement accounts such as SEP IRAs, one of the chief concerns is about account maintenance, in particular, IRS reporting rules.

However, in this case, you do not have to worry about an IRS schedule and Vanguard will take care of everything else.

Withdrawals and Loans

Whether your contributions go towards Vanguard mutual funds or index funds does not matter because the funds belong to you and you are free to make a withdrawal at any time.

However, withdrawals made before age 59 and a half will attract a hefty federal tax penalty of 25% if the distribution is made within the first couple of years and 10% is made any time after that.

Investors are not allowed to take any loans from their SEP IRA or Simple IRA accounts.

You Need Vanguard Personal Advisor Services

With the assistance of the advisors of a reputable financial institution such as Vanguard, you can take advantage of some great mutual fund options to diversify your retirement account.

With lots of benefits, such as tax-deductible self-employment tax, a low minimum compensation requirement, and a wide range of Vanguard funds to choose from, establishing a SEP IRA or Simple IRA in 2023 should be at the top of your list.

Invest Your Retirement Savings With Vanguard Today!

If you are looking for the best options to invest your money for retirement, look no further than Vanguard. Opening an account is very easy, or you can transfer your existing retirement plans to Vanguard in a few simple steps.

It is not enough to simply save your money for retirement without investing in something as secure and profitable as mutual funds, individual stocks, index funds, and other paper assets.

Vanguard can help you to do that and secure your funds to guarantee a comfortable retirement.