SEP IRA contribution and RMD calculation for 73 year old client
I have a client who is 73 and still employed. He wants to make a SEP IRA contribution for the prior tax year 2024 (will deposit funds in March 2025). Since the client is subject to RMDs:
- Is the client eligible to contribute to the SEP IRA even though being subject to RMDs?
- The 2025 RMD would be based on the 2024 closing balance of the client’s SEP IRA. Would this balance need to be increased by the SEP IRA contribution being made in March 2025 for tax year 2024?
Permalink Submitted by Alan - IRA critic on Thu, 2025-02-27 15:11
Yes, client can contribute to the SEP IRA without an age limit, but RMDs must also be distributed.
The SEP contributions made after 12/31/2024 will not affect the 2025 RMD. They do not have to be added back.
The first RMD year is 2025, but all or any part of that RMD can be deferred to as late as 4/1/2026, which would result in two RMDs in 2026. Deferral should be considered in terms of when client plans to retire.
Permalink Submitted by Liam Timmons on Thu, 2025-02-27 17:30
Excellent – thanks so much!