Individual 401K and SEP IRA RMD’s
I have a self-employed client. She is 69 years old and currently has an individual 401K established with her company. She is still actively working and therefore does not have to start taking RMD’s when she turns 70 1/2. She would like to rollover a portion of those 401K assets into another investment but does not want to take RMD’s. If she were to roll it over into an IRA she would be required to take RMD’s. My question is, can she roll it over into a SEP IRA that is set up through her corporation and still avoid RMD’s since she is still working? Also, would she be able to fund both the 401K and the SEP IRA in future years?
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-01 19:41
She must take RMDs from any non Roth IRA type and also from the solo K because she is a greater than 5% owner of the business. She could do an IRA rollover this year without RMDs only if she will not reach 70.5 by the end of this year. With a SEP IRA or solo K, contributions can continue regardless of age, but RMDs must also start for the year she will reach 70.5.
Permalink Submitted by Philip Detlefs on Tue, 2014-04-01 19:45
OK, thanks. So to clarify, if she were NOT a 5% or more owner she would not have to take RMD’s as long as she is still working?
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-01 20:09
That is correct, but there are a small % of 401k plans that require everyone to start RMDs at 70.5. And all SEP and SIMPLE IRA also require RMDs to start at 70.5 for everyone.