Solo 401(k) vs SEP IRA RMD Rules at 73: Why Staying Employed Changes Nothing

Guides · Updated October 2026

There is a rule that lets people who are still working delay their 401(k) withdrawals until they retire. If you run a solo 401(k), you have probably heard of it, and you may have assumed it covers you. It does not. The solo 401(k) vs SEP IRA RMD rules at age 73 share one surprise: your employment status is irrelevant. The IRS starts the clock when you turn 73 whether you are retired, consulting full time, or running the business harder than ever.

The shared starting line: age 73

Both plans begin required minimum distributions in the year the owner turns 73. The mechanics are the same, too: divide the prior December 31 balance by a life expectancy factor from the IRS Uniform Lifetime Table, and that quotient is the amount you must withdraw for the year. The factor shrinks as you age, so the required percentage of the account grows over time.

You get until April 1 of the year after you turn 73 to take the first RMD. That delay is not free: if you use it, you take two RMDs in one calendar year, the deferred one for the prior year plus the current one. On a large balance that double withdrawal can land you in a higher bracket for that year, which is why many people take the first RMD in the year they actually turn 73.

Why the still-working exception skips you twice

The still-working exception is real, but it is narrow. It allows employees of a company sponsoring a 401(k) to delay RMDs from that company's plan until they separate from service, provided they own 5% or less of the business. Notice the two conditions, because each one disqualifies one of our plans.

A solo 401(k) fails the ownership condition by definition. You are the business; you own all of it. The exception's whole point is to protect rank-and-file employees who keep working into their 70s. It was never meant for the person who signs the plan documents.

A SEP IRA fails on the plan-type condition. Despite the name, a SEP is legally an individual retirement arrangement, not a qualified employer plan. The still-working exception applies only to qualified plans of the current employer, and it never extends to any IRA. A 74-year-old sole proprietor still contributing to the SEP IRA, still actively running the business, owes RMDs on it just the same. Continued employment changes nothing.

The one real difference: Roth lives only in the solo 401(k)

If RMD timing is identical across both plans, what actually differs at 73? The Roth option.

Starting with the 2024 tax year, the SECURE 2.0 Act exempted designated Roth balances inside 401(k) plans from RMDs for the rest of the account owner's lifetime. That puts Roth solo 401(k) money on the same footing as a Roth IRA: it can keep growing tax-free for as long as you live, with no forced withdrawals pushing taxable income higher.

SEP IRA balances are always pre-tax. There is no Roth SEP at most providers, so the entire account is subject to RMDs. A solo 401(k) holder who spent the last decade routing employee deferrals into the Roth side of the plan walks into 73 with a chunk of the balance that the RMD rules simply do not touch.

That sounds like a clean win for the solo 401(k), and it is, with one honest caveat: Roth in a solo 401(k) rides on the employee-deferral side, capped at the annual deferral limit ($24,500 for 2026 if you are under 50). The employer profit-sharing side is pre-tax. You cannot Roth your way out of the whole balance; you can only carve out the deferral-sized piece.

The aggregation rule most people get wrong

The second difference is logistics.

For IRAs, the IRS lets you aggregate. Compute the RMD for each traditional, SEP, and SIMPLE IRA you own, add them up, and take the total from any one of the accounts (or split it however you like across them). One withdrawal can satisfy all of them.

For 401(k) plans, there is no such shortcut. Each plan's RMD is calculated separately and must come out of that plan. If you also have an old W-2 employer's 401(k), that one needs its own RMD from its own account, which is why consolidating before RMD age simplifies your life.

What does not work: rolling for a delay

Every few months someone asks whether rolling a SEP IRA into a solo 401(k) postpones the RMD start date. The answer is no, and the reasoning is now familiar: both plans begin at 73. There is no RMD arbitrage between them. The rollover is a fine move for other reasons, access to plan loans, consolidating for the aggregation rules, clearing IRA balances for backdoor Roth conversions, but the RMD clock follows you across the transfer.

Miss an RMD entirely and the IRS charges a 25% excise tax on the amount you failed to withdraw. Correct the failure within two years and the rate drops to 10%. It is still a steep price for a calendar mistake, so the practical advice is unglamorous: compute the number in January, take the withdrawal, keep the confirmation.

One thought for readers still under 73: the RMD rules reward planning you do decades early, not tactics you attempt at 72. Every Roth deferral in your solo 401(k) is a dollar the RMD rules will never touch. The SEP IRA has no equivalent lever. That difference will not matter for 20 years, and then it will matter every single April.

Frequently asked questions

Related: Can You Roll a SEP IRA Into a Solo 401(k)? · Solo 401(k) Roth vs Traditional: The One Number That Decides It · Solo 401(k) Catch-Up Contributions After 50 · Can I Have a Solo 401(k) and a Traditional IRA at the Same Time?

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