SEP-IRA RMD Rules: Aggregation, the QCD Restriction, and What Self-Employed Retirees Need to Know

A SEP-IRA is structurally an individual retirement arrangement — which means it follows IRA rules, not 401(k) rules. There is no still-working exception. RMDs start at 73 (or 75 for those born in 1960 or later) regardless of whether you're still running your business. But a SEP-IRA has two rules that catch self-employed retirees off guard: it aggregates with all your traditional IRAs for RMD purposes, and making SEP contributions in the current tax year can block you from using that account for qualified charitable distributions. Here's a complete breakdown.

Who holds SEP-IRAs

Simplified Employee Pension (SEP) IRAs are used by:

• Sole proprietors and self-employed individuals — freelancers, consultants, independent contractors, and professionals (physicians, dentists, attorneys, CPAs) with a solo practice
• Small business owners — employers with a small number of employees who want a simple, high-limit plan without the administrative complexity of a 401(k)
• Partners in professional partnerships — each partner may maintain their own SEP-IRA funded by the partnership
• Individuals with multiple income sources — a W-2 employee who also has self-employment income can maintain a SEP-IRA for the self-employment portion

The defining characteristic of a SEP-IRA is its high contribution ceiling. In 2026, the maximum contribution is the lesser of 25% of compensation or $72,000, with a compensation cap of $360,000.¹ Over a 20-30 year career of maxing out a SEP, a self-employed professional can easily accumulate $2M–$5M+ in the account — at which point the RMD is not a minor administrative detail but a six-figure annual income event that requires careful tax coordination.

RMD starting age: same as traditional IRA

Because a SEP-IRA is a type of IRA, the SECURE 2.0 Act § 107 RMD age rules apply directly:²

The April 1 first-year deadline creates a double-distribution trap for retirees who defer their initial RMD. If you defer the year-1 distribution to April 1, you must take two full RMDs in the same tax year — year 1's (by April 1) and year 2's (by December 31). For a self-employed retiree with a $2M SEP-IRA, that can mean $150,000+ of taxable income stacked into a single calendar year. The safer path for most is taking the first RMD in the year you reach the RMD age, before December 31. See our RMD starting age guide for the full birth-year analysis.

How to calculate your SEP-IRA RMD

The RMD calculation is identical to a traditional IRA:

1. Find your SEP-IRA balance as of December 31 of the prior year (use the custodian's December 31 statement).
2. Find your IRS Uniform Lifetime Table divisor for your age in the current year.
3. Divide the balance by the divisor.

If your spouse is the sole beneficiary of your SEP-IRA and is more than 10 years younger than you, you may use IRS Table II (Joint Life and Last Survivor Expectancy) instead, which produces a smaller divisor and therefore a smaller RMD. See our spousal RMD strategy guide for a side-by-side comparison of the divisors.

Example: A retired physician, born in 1952, reaches age 74 in 2026. Their SEP-IRA had a December 31, 2025 balance of $1,800,000. The Uniform Lifetime Table divisor at age 74 is 25.5. Required distribution: $1,800,000 ÷ 25.5 = $70,588 — a significant taxable income event that pushes well into the 22% or 24% bracket and potentially triggers IRMAA surcharges.

Use our RMD Calculator to calculate the required amount and see a 10-year projection as your SEP balance shrinks over time.

Aggregation: SEP-IRA pools with all your traditional IRAs

This is the most commonly misunderstood aspect of SEP-IRA RMDs. A SEP-IRA is an IRA — which means it enters the IRA aggregation pool along with every other traditional IRA you own (including rollover IRAs, conduit IRAs, and contributory IRAs).³

This flexibility is valuable: if your SEP-IRA is invested in a deferred annuity or an illiquid alternative asset, you can satisfy the entire RMD from a more liquid IRA held at a custodian like Vanguard, Fidelity, or Schwab.

What does NOT aggregate with your SEP-IRA: 401(k) plans (including Solo 401(k)s), 403(b) accounts, and 457(b) plans each have their own separate distribution requirement. If you also have a Solo 401(k) from a prior business, or a 403(b) from an earlier academic or nonprofit career, those plans must satisfy their own RMD independently — you cannot use your SEP-IRA distribution to cover a 401(k) shortfall. See our RMD aggregation rules guide for the full account-type breakdown.

No still-working exception for SEP-IRAs

This surprises many self-employed retirees who are familiar with the 401(k) still-working exception. Here is the distinction:

• 401(k) and 403(b) plans: Participants who are still employed at the plan sponsor and own less than 5% of the organization can delay RMDs from that specific plan until the year they actually retire.
• IRAs (including SEP-IRAs): No such exception exists. RMDs begin at age 73 or 75 regardless of whether you are still running your business, still earning self-employment income, and still making SEP contributions.

This creates a scenario that catches many solo practitioners off guard: a self-employed attorney or consultant who turns 73 in 2026 must begin taking RMDs from their SEP-IRA even if they are actively practicing and continue making SEP contributions for the same tax year. The contributions reduce the following year's RMD base; the current year's RMD obligation is not deferred.

Important note for Solo 401(k) owners: Unlike employees at a company who may be <5% owners, a sole proprietor owning their own business is by definition a ≥5% owner. This means the still-working exception does NOT apply to a Solo 401(k) held by a sole proprietor, either — the 5% ownership rule disqualifies them. For most self-employed individuals, neither a SEP-IRA nor a Solo 401(k) provides RMD deferral past age 73/75. See our 401(k) RMD rules guide for more on the still-working exception and the 5% ownership test.

QCDs from SEP-IRAs: the ongoing-contribution restriction

This is the most consequential rule for charitably inclined self-employed retirees who continue running their business into their 70s.

Under IRC § 408(d)(8)(B), a qualified charitable distribution (QCD) cannot be made from a SEP-IRA if the employer (you, as a self-employed individual) makes a contribution to the SEP agreement for the plan year ending with or within your taxable year in which the QCD distribution is made.⁴

The planning implication: If you want to use QCDs to offset your growing RMD — the most tax-efficient way to give up to $111,000 in 2026 to charity while excluding it entirely from AGI — you may need to stop SEP contributions and roll the SEP-IRA to a traditional IRA. Once rolled, the traditional IRA has no ongoing-contribution restriction and QCDs are available in the year you reach age 70½.

See our QCD strategy guide for how the income exclusion, IRMAA cliff avoidance, and Social Security taxation interaction work together.

Roth SEP-IRA: no lifetime RMDs

SECURE 2.0 Act § 601 authorized employers (including self-employed individuals) to make Roth contributions to SEP-IRA plans beginning in 2023. A Roth SEP-IRA, like a Roth IRA, is not subject to lifetime required minimum distributions.²

If your SEP plan was updated by your plan custodian to allow Roth contributions and you have been directing contributions to a Roth SEP-IRA account, those balances are exempt from RMDs during your lifetime. Your beneficiaries will be subject to the 10-year rule after your death (same as inherited Roth IRA), but there are no annual distribution requirements for beneficiaries during the 10-year window.

Practical note: Not all SEP custodians implemented Roth SEP-IRA accounts immediately after SECURE 2.0 passed. If your existing SEP-IRA is a traditional (pre-tax) account, you can contribute only on a pre-tax basis unless your plan was updated. Check with your custodian.

Roth conversion from SEP-IRA: You can convert your traditional SEP-IRA to a Roth IRA using the same rules and mechanics as converting a traditional IRA. The conversion is a taxable event in the year of conversion but eliminates future RMDs on the converted amount. For self-employed individuals still running a profitable business at 65–72, the pre-RMD window is the optimal conversion window — see our Roth conversion guide for the bracket-filling math.

SEP-IRA vs. Solo 401(k) at RMD age: key differences

Key takeaway: For a self-employed individual with large pre-tax balances heading into the RMD years, the most important practical difference is QCD eligibility. A SEP-IRA that is no longer receiving contributions can make QCDs immediately; a Solo 401(k) cannot — it must be rolled to an IRA first, and rolling mid-year requires satisfying the final 401(k) RMD before the rollover.

Inherited SEP-IRA: the 10-year rule applies

Non-spouse beneficiaries who inherit a SEP-IRA after December 31, 2019 are subject to the SECURE Act 10-year rule: the account must be fully distributed by December 31 of the 10th year after the year of death.

Under T.D. 10001 (finalized July 2024), if the original account owner had already reached their Required Beginning Date and was taking RMDs, the beneficiary must also take annual RMDs in years 1–9 of the 10-year period, with the full balance distributed by year 10. The annual distributions use the Single Life Expectancy Table.⁵

An inherited SEP-IRA cannot be aggregated with the beneficiary's own IRAs for RMD purposes. It forms its own separate distribution pool — though inherited IRAs from the same decedent can be aggregated with each other if held at the same custodian.

Eligible Designated Beneficiaries (EDBs) — surviving spouses, minor children of the decedent, disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the decedent — retain the stretch distribution option and are not limited to 10 years. See our beneficiary designation guide for the full EDB categories and planning considerations.

Should you roll your SEP-IRA to a traditional IRA before RMD age?

For most self-employed retirees who have ceased contributing to their SEP, the SEP-IRA already functions exactly like a traditional IRA. There is often no urgency to roll it — it aggregates with your other IRAs, and once you stop contributing it becomes fully QCD-eligible. But there are reasons to consolidate:

Reasons to roll the SEP-IRA to a traditional IRA:

• Simplification. If you have both a SEP-IRA and one or more traditional IRAs, rolling consolidates into a single account — fewer custodians, simpler aggregation math, one December 31 balance to track.
• Investment options. Some SEP-IRA custodians (particularly insurance company platforms) have limited investment menus or higher expense ratios. Rolling to a custodial IRA at a major brokerage unlocks lower-cost index funds.
• QCD clarity. If you are still making occasional small SEP contributions and want QCD access, rolling to a traditional IRA at a new custodian and closing the SEP cleanly eliminates ambiguity about the ongoing-contribution restriction.
• Roth conversion window. Rolling to a traditional IRA doesn't itself trigger a taxable event — but it positions you for a bracket-filling Roth conversion strategy using your IRA custodian's tools.

Timing: RMD amounts are not eligible for rollover — they must be distributed first. If you want to roll a SEP-IRA to a traditional IRA after your RMD age, you must satisfy the SEP-IRA's RMD for the year before rolling the remaining balance.

What an advisor models that you can't easily do alone

Self-employed retirees with large SEP-IRA balances often face the most complex RMD picture of any retiree type — because the RMD income can interact with Social Security taxation, IRMAA surcharges, QBI deduction phaseouts (if still earning business income), and the timing of a Roth conversion window that closes at 73. A specialist will:

• Quantify the 10-year tax cost of the current RMD trajectory vs. a partial Roth conversion strategy in years 65–72
• Model the QCD opportunity: if you stop SEP contributions this year and begin QCDs next year, what's the 10-year tax savings at your bracket?
• Analyze the IRMAA impact of a growing RMD — Part B and Part D surcharges can add $5,000–$15,000/year for high-balance SEP holders
• Coordinate SEP-IRA RMDs with other income (Social Security, business income, taxable investment accounts) to manage the provisional income formula and the "tax torpedo" in the SS phase-in range
• Determine whether a rollover to a traditional IRA makes sense given your specific custodian, investment lineup, and contribution timeline

For self-employed professionals still running a business in their late 60s or early 70s, the window to Roth-convert part of a large SEP before RMDs begin is the most valuable planning period. See our Roth conversion sizing calculator, IRMAA planning guide, and strategies to reduce RMDs for how these pieces fit together.

Sources

1. IRS — SEP Contribution Limits (Including Grandfathered SARSEPs). 2026 SEP-IRA contribution limit: lesser of 25% of compensation or $72,000; compensation cap $360,000. Per IRS Rev. Proc. 2025-43 (2026 cost-of-living adjustments). // Source: IRS.gov 2026 SEP limits
2. IRS — Retirement Topics: Required Minimum Distributions (RMDs). SECURE 2.0 Act § 107: RMD age 73 for born 1951–1959; age 75 for born 1960+. SECURE 2.0 § 601: Roth contributions now permitted in SEP-IRAs starting 2023; Roth SEP balances have no lifetime RMD requirement.
3. IRS — RMD Comparison Chart: IRAs vs. Defined Contribution Plans. SEP-IRAs are IRAs for RMD aggregation purposes: SEP-IRA balances pool with all traditional IRAs; combined RMD total can be satisfied from any one IRA or SEP-IRA in the pool. 401(k) and 403(b) plans do not aggregate with IRAs.
4. IRS Publication 590-B — Distributions from Individual Retirement Arrangements. IRC § 408(d)(8)(B): QCD exclusion does not apply to a distribution from a SEP or SIMPLE IRA if contributions are made to the plan under a SEP or SIMPLE agreement for the employer's tax year ending with or within the owner's taxable year in which the QCD is made. 2026 QCD annual limit: $111,000 (indexed for inflation). // Source: IRS Pub 590-B 2025 (applying to 2026)
5. IRS — IRA Required Minimum Distributions. T.D. 10001 (July 2024): finalized inherited IRA annual RMD requirement for non-EDB beneficiaries under the 10-year rule when the decedent had passed the Required Beginning Date; beneficiaries must take annual distributions in years 1–9 with full balance by year 10. Single Life Expectancy Table used for annual calculation.

SEP-IRA RMD rules verified against IRS guidance and IRS Publication 590-B, May 2026. 2026 contribution limits per IRS Rev. Proc. 2025-43. QCD limit $111,000 per IRS inflation adjustment. SECURE 2.0 provisions effective per IRS guidance. Individual situations vary — confirm plan-specific rules with your custodian or tax advisor.