Should I start a SEP-IRA for my business?
June 15, 2005
From: Dan
Date: 24 May 2005
I am considering setting up a SEP-IRA. Our business is incorporated and there only two employees - myself and my mother. She is 73 years young and I am 53. We both earn paychecks. She is starting to withdraw her retirement due to her age.
Can we establish a SEP-IRA? I read the IRS publication about SEPs and I see the limitation for a person under age 21 but don't see a limitation for someone who still works and is over 70.
Answer
Date: Mon, 06 June 2005
Hello Dan,
I can't see any prohibition for a person over age 70 from participating in a SEP.
Although you generally can't contribute to a "regular" IRA after age 70 1/2, a SEP is a replacement for a regular retirement account, so I believe that prohibition doesn't apply for a SEP. (The prohibition appears to apply to contributions by an individual on his or her own behalf, but not to contributions by the employer. IRC Section 219(d)(1).)
The minimum required distribution rules do apply, so your mother will be required to take distributions from her IRAs.
Before you go ahead, check with the plan administrator you are planning to use whether they are aware of a prohibition. Let me know if they have a different answer.
Good luck!
Mike Gray
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