“In a few years I will have to take required minimum distributions (RMDs) from my traditional IRA (currently my only retirement account).” – MarketWatch photo illustration/iStockphoto
I have a few questions about retirement accounts. Thanks in advance.
1) In a few years I will have to take required minimum distributions (RMDs) from my traditional IRA (currently my only retirement account). I plan to work until age 80 or so. Will I be able to continue contributing to the IRA even after beginning RMDs?
2) I’m self-employed. No employees and not incorporated. My income is reported on a 1099-K (basically a pass-through from the company that processes my clients’ credit-card payments). I contribute the max to my IRA every year. I will soon, in addition, derive income as an independent contractor and that income will report on a standard 1099. So I’ll have both. My key question: Can I open a SEP-IRA for the 1099 income (and possibly even the 1099-K income)? If so, can I contribute to both?
Sincerely,
Self-Employed Saver
See: I’ve been getting the wrong Social Security Disability benefit for years. How do I fix it?
To answer your first question simply — yes. Because it is an IRA, you will have to take RMD — but thanks to the Secure Act, you can continue to contribute to the account so long as you receive earned income.
To answer your second question simply — also yes. You can use 1099 income to fund a SEP-IRA since it is self-employment income. The same goes for your 1099-K income if it’s self-employment income, too. With this question, there’s a bit more to know, though.
A SEP-IRA is basically just a traditional IRA for business owners, so it follows many of the same rules as the account you’ve already come to know. There are, however, a few differences. For example, the maximum you can contribute to a SEP in 2025 is the lesser of up to 25% of your total compensation, which is determined by your net earnings, or up to $70,000.
“There is no limitation when coordinating a SEP-IRA and a traditional IRA,” said Byrke Sestok, a partner at Moneco Advisors. You can contribute to a SEP as well as to your traditional IRA, since the SEP is funded with employer contributions and the traditional IRA is made with personal contributions.
“You can both receive employer contributions to a SEP-IRA and make regular, annual contributions to a traditional or Roth IRA. Employer contributions made under a SEP plan do not affect the amount you can contribute to an IRA on your own behalf,” according to the Internal Revenue Service.