Can I Rollover My SEP IRA?

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Simplified employer plan IRAs allow employers to make contributions to an individual retirement account on behalf of their employees. The Internal Revenue Service rules allow you to withdraw the money from your SEP IRA at any time -- your employer can't require you to keep it in the company plan. However, there are a few limits on when you can rollover your SEP IRA and which accounts you can roll the money into.

Rollover Options

The IRS allows you to roll over money from your SEP IRA into a range of retirement accounts, including traditional IRAs, Roth IRAs, 401(k)s, 403(b)s and even other SEP IRAs. To complete a rollover, you take a distribution from your SEP IRA and within 60 days deposit the money into an eligible retirement account. You're not allowed to roll the money into a SIMPLE IRA or a Roth 401(k) or Roth 403(b).

Warning

  • It doesn't matter what you do with the money between the time you take it out of your SEP IRA and the time you roll it into another account. However, if more than 60 days pass, you can't complete the rollover and the distribution is permanent.

Tax Implications

As long as you redeposit the entire amount withdrawn, you won't owe any early withdrawal penalties. You'll also avoid paying any taxes if you roll the money into another tax-deferred account, such as a traditional IRA or 401(k) plan. If you use the rollover to convert the money into a Roth IRA, however, you must include the amount of the rollover as taxable income. But, you'll get to take qualified distributions tax-free.

Limits on Rollovers

You can only perform one rollover per year across all of your IRAs -- including traditional IRAs, SEP IRAs, Roth IRAs and SIMPLE IRAs -- during any one-year period. For example, if you rolled over your traditional IRA last month, you can't rollover your SEP IRA for another 11 months. If you take a distribution prior to that time, you're not allowed to do a rollover.

Tip

  • If you've already used your one rollover in the past year, you can still move money from your SEP IRA by using a transfer. With a transfer, the money is moved directly from your SEP IRA into the other qualified retirement plan by your financial institution -- without the money being paid to you first.

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