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.


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

For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.

Home    Newsletter Archive    Introducing Michael Gray, CPA    Articles    Tax FAQ   Need Help?    Other Links

Michael Gray, CPA
2482 Wooding Ct.
San Jose, CA 95128
(408) 918-3162
FAX: (408) 938-0610
Hours: 8am - 5pm PDT Monday - Friday

Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Our Blog

Subscribe to Michael Gray, CPA's
Tax & Business Insight

We respect your email privacy