Question: I'm self-employed and still working at age 70½. Most of my retirement money is in a simplified employee pension (SEP) rather than a 401(k). Do I still need to take required minimum distributions? How are required distributions for SEP IRAs calculated?
Answer: Even though you can generally delay taking required minimum distributions from your current employer's 401(k) while you are still working (unless you own 5% or more of the company), those rules don't apply to traditional IRAs. You must start taking RMDs at 70½, whether or not you are still working. SEP IRAs are treated like traditional IRAs, and therefore you must take withdrawals from the SEP IRA starting by age 70½, says Maura Cassidy, vice president of retirement for Fidelity Investments. You have until April 1 of the year after you turn 70½ to take your first required withdrawal, but after that you must take RMDs by December 31 each year (even if you took your first RMD on April 1 of that same year).
The rules for calculating required minimum distributions for a SEP are also the same as for a traditional IRA. You must calculate the required withdrawals separately for each traditional account, but then you can take the total amount from any of your traditional IRAs or from your SEP, or any combination of those accounts. Roth IRAs are not included, however, because they do not have RMDs.
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Our RMD calculator can help you figure out how much you must withdraw. Also see 10 Things Boomers Must Know About RMDs from IRAs for more information.
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