This Week's Q&A Mailbag: SEP contributions, RMDs, and Inherited IRAs | Ed Slott and Company, LLC

This Week's Q&A Mailbag: SEP contributions, RMDs, and Inherited IRAs

By Jim Glass, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:
The business is a sole proprietor operation with no employees other than the owner.  The owner is 71 and is still working.  Are contributions into this SEP allowable after the age of 70 1/2?

Thank you,

Lee


Answer:
Yes, the business owner can continue making contributions to the SEP after reaching age 70½.

However, be aware that the owner must also begin taking annual required minimum distributions from the SEP upon reaching age 70½, even when continuing to make contributions to it.


Question:
I have a client who is a surviving spouse of an individual with a 401(k) account – he died in service so no RMDs had begun.  My client rolled the 401(k) balance to an Inherited IRA (the wrong forms were given to her by the IRA custodian).  This occurred with the spouse (beneficiary) was 68 years old (she is only a few months older than her deceased husband). 

Now she is 70½ and has to start drawing funds from the Inherited IRA, and the custodian is using the Single Life Table because it is titled as an Inherited IRA. 

Can she roll over the IRA balance to her own IRA at this point so that she may use the Uniform Life Table?  Can she just correct the title of the IRA?

Thanks much

Buz

 

Answer:
Yes, an individual with an inherited IRA received from a spouse can always move it into an IRA of his or her own. She can also “treat the account as her own.” She would do this by calculating the RMD as if she were the IRA owner using her own age and life expectancy factor from the Uniform Lifetime Table. The inherited account should still be moved to an IRA in her name. It should be moved as a direct transfer so that any RMD that needs to be taken for this year can come out of the IRA in her own name.

 


Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.