Retirement Savings Solutions

What is a traditional IRA?
A traditional IRA is an account that allows individuals the opportunity to save for retirement on a tax-deferred and potentially tax-deductible basis.

How does a traditional IRA work?
A contribution to a traditional IRA may be partially, fully, or non-tax-deductible, dependent upon household income, tax-filing status, and active participation in a workplace retirement plan (e.g., 401(k)).

Investment gains are not subject to taxation until funds are withdrawn.  Funds are taxed as ordinary income in the year withdrawn.

Who should consider a traditional IRA?

• Individuals who do not have access to a workplace retirement plan
• Individuals who wish to supplement their retirement savings
• Individuals seeking a tax deduction
• Individuals seeking tax-deferred growth

What benefits does a traditional IRA offer?

• Contributions may be tax-deductible¹
• Earnings are tax-deferred until withdrawn
• Withdrawals are not required until the year an account owner reaches the applicable age at which Required Minimum Distributions (“RMDs”) must begin
• Flexible withdrawal options 
• Funds can be converted to a Roth IRA 

This material is intended as general information only and is not intended as legal, financial or tax advice. Some of this information may be quite complex, and we strongly suggest you consult with your advisor or tax professional based on your individual situation. 

An individual is eligible to contribute to a traditional IRA for a tax year if either of the following criteria is satisfied:

• You received taxable compensation (earned income) during such tax year, or
• Your spouse received taxable compensation during such tax year provided you file a joint tax return with your spouse.   

Participation in an employer’s workplace retirement plan (e.g., 401(k), 403(b), SIMPLE IRA, etc.) does not preclude an individual from contributing to an IRA, although plan participation may affect an individual’s ability to make a tax-deductible, traditional IRA contribution.

An individual (or if married; their spouse) not covered by a workplace retirement plan, regardless of income, is eligible to make a fully deductible traditional IRA contribution. 

Traditional IRA contribution deduction eligibility:

Tax Filing	Modified Adjusted Gross Income (MAGI)2	Allowable Deduction
Single	$77,000 or less in 2024 ($ 79,000 in 2025)	Full deduction
	More than $77,000, but less than $,87,000 in 2024 ($,79,000 to $89,000 in 2025)	Partial deduction
	$87,000 or more in 2024 ($89,000 in 2025)	No deduction
Married filing jointly (both spouses covered by a retirement plan)	$123,000 or less in 2024 ($126,000 in 2025)	Full deduction
	More than $,123,000, but less than $143,000 in 2024 ($,126,000 to $,146,000 in 2025)	Partial deduction
	$,143,000 or more in 2024 ($146,000 in 2025)	No deduction
Married filing jointly (one spouse is covered by a retirement plan)	$230,000 or less in 2024 ($236,000 in 2025)	Full deduction for non-covered spouse
	More than $230,000, but less than $240,000 in 2024 ($236,000-$246,000 in 2025)	Partial deduction for non-covered spouse
	More than $240,000 in 2024 ($246,000 in 2025)	No deduction

Traditional IRA contributions plus earnings compound tax-deferred until distributed. Amounts distributed from a traditional IRA are generally included as taxable income in the year received and may be subject to a 10% penalty tax if funds are distributed prior to age 59½ unless an exception applies. 

This material is intended as general information only and is not intended as legal, financial or tax advice. Some of this information may be quite complex, and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

How much may an investor contribute to a traditional IRA?
An investor may contribute up to the following amounts to a traditional IRA:

Year	Contribution Limit	Age 50 Catch-up Contribution
2024	$7,000	$1,000
2025	$7,000	$1,000

May an investor contribute to both a traditional IRA and a Roth IRA?
Yes, assuming the investor meets Roth IRA eligibility requirements. However, an investor has one combined IRA contribution limit which, for 2025, is $7,000 ($8,000 if age 50 or older).

When may an investor contribute to a traditional IRA?

An investor may make a traditional IRA contribution anytime throughout the year. In addition, contributions for the prior tax year may be made as late as the investor’s tax-filing due date for such prior year; generally, April 15^th (not including extensions). For example, an investor is eligible to make a 2024 traditional IRA contribution as late as April 15, 2025. 

What if the contribution limit is exceeded?

An investor needs to remove the excess funds by their tax-filing due date, including extensions, or they will incur a 6% excise tax on the excess funds.

What types of distributions can be taken from a traditional IRA?
There are several distribution types that can be taken from a traditional IRA. We briefly summarize each distribution type below.

• Normal Distribution occurs after the owner attains age 59½. A normal distribution is generally subject to taxation in the year withdrawn, but the 10% early withdrawal penalty tax does not apply.
• Premature Distribution (without an exception) occurs upon the owner withdrawing funds before age 59½, and an exception does not apply. The distribution is taxable and subject to a 10% penalty tax.
• Premature Distribution (with an exception) occurs upon the owner withdrawing funds before age 59½ and satisfying an exception. Although the distribution is subject to taxation, the 10% penalty tax does not apply.

The following are common exceptions to the 10% penalty tax on early withdrawals:

• Substantially equal periodic payments (“Rule 72(t)”)
• Qualifying disability
• Death of the IRA owner
• Qualified higher education expenses
• A distribution that is no more than the amount paid for health insurance premiums after receiving unemployment benefits for more than 12 weeks
• Unreimbursed medical expenses (greater than 7.5% of adjusted gross income)
• First-time home purchase (lifetime limit of $10,000) 
• Qualified birth or adoption
• Qualified reservist distribution
• IRS levy
• Federally declared disaster
• Terminal illness
• Domestic Abuse
• Required Minimum Distribution
  
• 60-day Withdrawal and Rollover

What are the required minimum distribution rules?
A traditional IRA account owner must receive a required minimum distribution (an “RMD”) the year he or she attains the applicable age as follows:

• Age 72 for individuals who attain age 72 on or prior to December 31, 2022
• Age 73 for individuals who attain age 72 after December 31, 2022 and before January 1, 2033
• Age 75 for individuals who attain age 74 after December 31, 2032

The RMD rules permit the initial minimum distribution to be deferred until April 1^st of the following year. Delaying an initial RMD requires the account owner to take two RMDs the following year.  An RMD must be taken annually thereafter.

If the full RMD is not taken each year, a 25% penalty tax is assessed on the amount that should have been received. However, if the missed RMD is corrected by the end of the second taxable year after the year in which the RMD should have been made, the penalty tax is reduced to 10%. See our calculator to determine your RMD.

What is a 60-day withdrawal and rollover?
Once in a 12-month period (not calendar year), an IRA owner may withdraw any amount, for any reason, from any of their IRAs, and repay the funds within 60 days without being subject to taxation or an early withdrawal penalty. If not repaid within their 60-day window, the IRA owner will be subject to taxation and potential penalties.

The one IRA rollover per year applies on a per-taxpayer basis. Therefore, an IRA owner can elect a single 60-day withdrawal and rollover in a 12-month period regardless of the number or type of IRAs owned.³

What are the available death benefits from a traditional IRA?When a traditional IRA account owner dies, an inherited IRA is established. However, the treatment of an inherited IRA differs depending on who inherits the account.

Please note that the rules applicable to inherited IRAs are complex and vary substantially depending on facts and circumstances.   The general rules set forth below are not intended as legal, financial or tax advice and we recommend that you consult with your advisor or tax professional based on your individual situation.

Spousal beneficiary:
Spousal beneficiary has the following options available upon inheriting a traditional IRA:

• Treat the IRA as his or her own IRA
• Rollover the IRA into his or her own IRA
• Transfer the IRA to an employer-sponsored retirement plan where he or she is a participant
• Remain a beneficiary 
• Elect to be treated as the deceased spouse (i.e., delay required minimum distributions until the year in which the deceased spouse would have reached age 73)

Non-Spouse Beneficiary:
The Setting Every Community for Retirement Enhancement (SECURE) Act introduced changes to long-standing rules that apply to retirement accounts inherited by a non-spouse beneficiary. The new rules generally apply to beneficiaries that inherit an IRA on or after January 1, 2020. 

One such change was the elimination of the “stretch IRA” for most non-spouse designated beneficiaries and the introduction of a “10-Year Rule,”  requiring most non-spouse beneficiaries to liquidate the entire balance of their inherited retirement account within ten years after the account owner’s death.

What is a Roth IRA?
A Roth IRA offers income qualified investors of any age the opportunity to save for their retirement. Contributions are made with after-tax dollars and offer the potential of tax-free withdrawals, plus there are no required minimum distributions.

How does a Roth IRA work?
Roth IRA contributions are always made with after-tax dollars.  Earnings are tax-deferred but are distributed tax free if certain conditions are met.  Roth IRAs are not subject to required minimum distributions. 

In 2025, an investor may contribute up to $7,000 to a Roth IRA, plus a catch-up contribution of $1,000 for those individuals age 50 and older. Contributions may be made at any time throughout the year, and as late as the investor’s tax-filing deadline (generally April 15) for the prior year.

Who should consider a Roth IRA?

• An individual who wants to accumulate tax-free retirement funds
• An individual who expects to receive a greater tax effective benefit after considering present and future tax rates 
• An individual who wants to leave his/her beneficiaries a potentially tax-free inheritance

What benefits does a Roth IRA offer?

• Withdrawals, including earnings, are potentially tax-free
• Tax diversification
• Beneficiary payouts can be structured allowing for tax-free payouts 
• No lifetime required minimum distributions 

Who is eligible?
An individual is eligible to contribute to a Roth IRA for a tax year if either of the following criteria is satisfied:

• You received taxable compensation (earned income) during such tax year that does not exceed IRS limits; or

• Your spouse received taxable compensation during such tax year that does not exceed IRS limits provided you file a joint tax return with your spouse. 
  

How does an individual’s income affect whether or not they may contribute to a Roth IRA?
An individual’s modified adjusted gross income (MAGI) for a tax year must satisfy certain thresholds to be eligible to contribute to a Roth IRA for such tax year.  

Roth IRA Income limits:

Tax Filing	Modified Adjusted Gross Income (MAGI)2	Amount of Contribution
Married filing jointly	For 2024, less than $230,000   For 2025, less than $240,000	For 2024, limited to  $7,000(or $8,000 if age 50 or older) For 2025, limited to $7,000 (or $8,000 if age 50 or older)
	For 2024, at least $230,000, but less than $240,000 For 2025, at least $236,000 but less than $246,000	Contribution is proportionately reduced
	For 2024, $240,000 or more For 2025, $246,000 or more	Zero
Single	For 2024, less than $146,000 For 2025, less than $150,000	For 2024, limited to $7,000 (or $ 8,000 if age 50 or older) For 2025, limited to $7,000 (or $8,000 if age 50 or older)
	For 2024, at least $146,000 but less than $161,000 For 2025, at least $150,000 but less than $165,000	Contribution is proportionately reduced
	For 2024, $161,000 or more For 2025, $165,000 or more	Zero
Married Filing Separately	$10,000 or less	Contribution is proportionately reduced
	Greater than $10,000 or more	Zero

Can an investor convert their existing traditional IRA to a Roth IRA?
All investors, regardless of age or income, including those with a SEP and SIMPLE IRA (two-year-holding period must be satisfied), can convert all or a portion of their IRA to a Roth IRA. Distributing pre-tax IRA assets via a conversion is a taxable event—subject to taxation in the year the conversion takes place.

Who should consider a Roth IRA conversion?

• An investor who wants tax-free income
• An investor who believes future tax rates will be higher than today’s rates
• An investor who wants tax diversification
• An investor who does not need to take required minimum distributions
• An investor who wants to leave his/her beneficiaries a potentially tax-free inheritance

How much may an investor contribute to a Roth IRA?
An investor may contribute the following amounts to a Roth IRA:

Year	Contribution Limit	Age 50 Catch-up Contribution
2024	$7,000	$1,000
2025	$7,000	$1,000

May an investor contribute to both a traditional IRA and Roth IRA?
Yes, assuming the investor meets Roth IRA eligibility requirements. However, an investor has one combined IRA contribution limit which, for 2025, is $7,000 ($8,000 if age 50 or older).

When may an investor contribute to a Roth IRA?
An eligible investor may contribute to a Roth IRA at any time during the year. In addition, contributions for the prior tax year may be made as late as the investor’s tax-filing due date for such prior year; generally, April 15^th (not including extensions). For example, an investor is eligible to make a 2024 Roth IRA contribution as late as April 15, 2025. 

What if the contribution limit is exceeded?
An investor needs to remove the excess funds by their tax filing due date, including extensions, or they will incur a 6% penalty tax on the excess funds. 

What types of distributions can be taken from a Roth IRA?
A Roth IRA owner can withdraw their contributions without being subject to income tax and or early distribution penalty at any time or age. A Roth IRA also allows for earnings to be distributed tax-free, so long as certain criteria are satisfied, referred to as a qualified distribution.

There are several different distribution types that can be taken from a Roth IRA. We briefly summarize each distribution type below:

What is a qualified distribution?
A qualified distribution is a federally tax-free distribution made on or after the end of the five-year period beginning with the first tax year for which a contribution was made to the Roth IRA and the distribution satisfies one of the following:  

1. The distribution is made on or after the date on which you attain age 59½
2.  The distribution is made because you are disabled
3. The distribution is made to your beneficiary or your estate due to your death
4. The distribution is no more than $10,000 and is used for the purpose of buying, building, or rebuilding your first home.

What is a non-qualified distribution?
A non-qualified distribution is a distribution other than those satisfying the “qualified distribution” requirements set forth above. While Roth IRA contributions are funded with after-tax dollars, earnings on such contributions are tax-deferred. Thus a non-qualified distribution is subject to income tax on the earnings portion only. In addition, the 10% penalty tax applies if the owner has not reached age 59½, and an exception does not apply.

What are the exceptions to the 10% penalty tax if a non-qualified distribution is taken before the owner has attained age 59 ½?
The following are common exceptions to the 10% penalty tax on early withdrawals:

• Substantially equal periodic payments (“Rule 72(t)”)
• Qualifying disability
• Death of the Roth IRA owner
• Qualified higher education expenses
• A distribution that is no more than the amount paid for health insurance premiums after receiving unemployment benefits for more than 12 weeks
• Unreimbursed medical expenses (greater than 7.5% of adjusted gross income)
• First-time home purchase (lifetime limit of $10,000) 
• Qualified birth or adoption
• Qualified reservist distribution
• IRS levy
• Federally declared disaster
• Terminal illness
• Domestic Abuse
• 60-day Withdrawal and Rollover
  

Are Roth IRA Owners subject to lifetime required minimum distributions (RMDs)?

No. A Roth IRA owner is not subject to lifetime required minimum distributions. 

What is a 60-day withdrawal and rollover?
Once in a 12-month period (not calendar year), a Roth IRA owner may withdraw any amount, for any reason, from any of their IRAs, and repay the funds within 60 days without being subject to taxation or an early withdrawal penalty. If not repaid within their 60-day window, the Roth IRA owner will be subject to potential taxation and penalties.

The one IRA rollover per year applies on a per-taxpayer basis. Therefore, a Roth IRA owner can elect a single 60-day withdrawal and rollover in a 12-month period regardless of the number or type of IRAs owned.

What are the available death benefits from a Roth IRA?
When a Roth IRA owner dies, an inherited IRA is established. However, inherited Roth IRA treatment differs depending on who inherits the account.

Please note that the rules applicable to inherited IRAs are complex and vary substantially depending on facts and circumstances. The general rules set forth below are not intended as legal, financial, or tax advice and we recommend that you consult with your advisor or tax professional based on your individual situation.

Spousal beneficiary:
A spousal beneficiary has the following options available upon inheriting a Roth IRA:

• Treat the IRA as his or her own Roth IRA
• Rollover the IRA into his or her own Roth IRA
• Remain a beneficiary 
• Elect to be treated as the deceased spouse (i.e., delay required minimum distributions until the year in which the deceased spouse would have reached age 73)

Non-Spouse Beneficiary:
The Setting Every Community for Retirement Enhancement (SECURE) Act introduced changes to long-standing rules that apply to retirement accounts inherited by a non-spouse beneficiary. The new rules generally apply to beneficiaries that inherit an IRA on or after January 1, 2020. 

One such change was the elimination of the “stretch IRA” for most non-spouse designated beneficiaries and the introduction of a “10-Year Rule,” thus requiring most non-spouse beneficiaries to liquidate the entire balance of their inherited retirement account within ten years after the account owner’s death.

What is a Rollover IRA?
A rollover IRA is a type of traditional IRA that is established through the transfer of an eligible rollover distribution from a former employer’s qualified retirement plan. When an individual who participates in their employer’s qualified retirement plan retires or severs service and receives an eligible rollover distribution from the plan, his or her former employer is required to provide the option of a tax-free transfer of the distribution to a rollover IRA. Amounts rolled over to a rollover IRA continue to accumulate on a tax-deferred basis.

How Do I Establish a Lord Abbett Rollover IRA?
Follow these steps to start the IRA rollover process:

1. Contact your former employer about completing any paperwork. Request the check be made payable to: “Lord Abbett Family of Funds” For Benefit of: [your name]. To ensure a seamless rollover, your newly established Lord Abbett IRA account number and “Direct Rollover” should appear on the check.
2. Complete a Lord Abbett IRA Application and Transfer Form.

For those individuals who are married, depending on the type of retirement plan type and/or its provisions, your spouse may need to consent to the rollover. 

For more information about how to transfer your retirement assets to Lord Abbett, please call our team of retirement specialists at 888-522-2388.  Any decision to transfer or rollover your retirement assets to a Lord Abbett IRA must be made by you and your advisors independent of Lord Abbett and its representatives. 

Who should consider a Rollover IRA?

• Individuals retiring or changing places of employment who prefer to keep their retirement funds in a tax-deferred⁴ account
• Individuals wishing to consolidate their retirement assets into a single tax-deferred account
• Individuals seeking a more diverse selection of investment options

What benefits does a Rollover IRA offer?

• Broad range of investment options 
• Tax-free transfer of assets
• Continued tax-deferral
• Asset consolidation (combine funds with other IRAs)
• Beneficiary flexibility 

An IRA rollover may involve the application of fees and charges to the investor.

Who is eligible to open a Rollover IRA?
Generally, an individual who has separated from service from a given employer or has reached certain other prescribed events in accordance with the terms of that employer’s plan may receive an “Eligible Rollover Distribution” from that retirement plan which may be transferred into a rollover IRA.

What is an Eligible Rollover Distribution that may be transferred to a Rollover IRA?
An Eligible Rollover Distribution is generally a distribution of all or any portion of the balance of an individual’s account in an employer’s qualified retirement plan, which is not one of the following:

• Required minimum distribution
• Hardship distribution
• Substantially equal, periodic payments under Section 72(t) 
• Corrective distributions of excess deferrals
• Deemed distributions on a defaulted plan loan

What type of workplace retirement accounts are eligible to be moved into a Rollover IRA?
Our flyer shows which retirement accounts are eligible for a rollover.

What is the Rollover IRA limit?
A rollover IRA is designed to receive funds from a former employer’s workplace retirement plan, thus avoiding current taxation. The dollar amount a rollover IRA receives is equal to the Eligible Rollover Distribution from an individual’s former employer's plan. 

Does an IRA Rollover affect annual IRA contribution limits?
No. An IRA rollover does not affect an investor’s annual IRA contribution limit.

Can I combine a Rollover IRA and a traditional IRA?
Yes. However, you are required to keep traditional IRA and Roth IRA funds in separate accounts.

What types of distributions can be taken from a Rollover IRA?
There are several distribution types that can be taken from a Rollover IRA. We discuss each distribution type below.

• Normal distribution occurs after the owner attains age 59½. A normal distribution is generally subject to taxation in the year withdrawn, but the 10% early withdrawal penalty tax does not apply.
• Premature distribution (without an exception) occurs upon the owner withdrawing funds before age 59½, and an exception does not apply. The distribution is both taxable and subject to a 10% penalty tax.
• Premature distribution (with an exception) occurs upon the owner withdrawing funds before age 59½ and satisfying an exception. Although the distribution is subject to taxation, the 10% penalty tax does not apply

The following are common exceptions to the 10% penalty tax on early withdrawals:

• Substantially equal periodic payments (“Rule 72(t)”)
• Qualifying disability
• Death of the IRA owner
• Qualified higher education expenses
• A distribution that is no more than the amount paid for health insurance premiums after receiving unemployment benefits for more than 12 weeks
• Unreimbursed medical expenses (greater than 7.5% of adjusted gross income)
• First-time home purchase (lifetime limit of $10,000)
• Qualified birth or adoption distribution
• IRS levy
• Federally declared disaster
• Terminal illness
• Domestic Abuse
• Required Minimum Distribution (“RMD”)
  
• 60-day Withdrawal and Rollover

What are the required minimum distribution (RMD) rules?
The owner of a rollover IRA must receive a required minimum distribution (an “RMD”) the year he or she attains the applicable age as follows:

• Age 72 for individuals who attain age 72 on or prior to December 31, 2022
• Age 73 for individuals who attain age 72 after December 31, 2022 and before January 1, 2033
• Age 75 for individuals who attain age 74 after December 31, 2032

The RMD rules permit the initial minimum distribution to be deferred until April 1^st of the following year. Delaying an initial RMD requires the account owner to take two RMDs the following year. An RMD must be taken annually thereafter.

If the full RMD is not taken each year, a 25% penalty tax is assessed on the amount that should have been received.  However, if the missed RMD is corrected by the end of the second taxable year after the year in which the RMD should have been made, the penalty tax is reduced to 10%. See our calculator to determine your RMD.

What is a 60-day withdrawal and rollover?
Once in a 12-month period (not calendar year), a rollover IRA owner may withdraw any amount, for any reason, from any of their IRAs, and repay the funds within 60 days without being subject to taxation or an early withdrawal penalty. If not repaid within the 60-day window, the rollover IRA owner will be subject to taxation and potential penalties.

The one IRA rollover per year applies on a per-taxpayer basis. Therefore, a rollover IRA owner can elect a single 60-day withdrawal and rollover in a 12-month period regardless of the number or type of IRAs owned.³

What death benefits are available from a Rollover IRA?
When the owner of a rollover IRA dies, an inherited IRA is established. However, the treatment of an inherited IRA differs depending on who inherits the account.

Please note that the rules applicable to inherited IRAs are complex and vary substantially depending on facts and circumstances. The general rules set forth below are not intended as legal, financial, or tax advice and we recommend that you consult with your advisor or tax professional based on your individual situation.

Spousal beneficiary:
A spousal beneficiary has the following options available upon inheriting a Rollover IRA:

• Treat the IRA as his or her own IRA
• Roll over the IRA into his or her own IRA
• Transfer the IRA to an employer sponsored plan where he or she is a participant
• Remain a beneficiary
• Elect to be treated as the deceased spouse (i.e., delay required minimum distributions until the year in which the deceased spouse would have reached age 73)

Non-Spouse Beneficiary:
The Setting Every Community for Retirement Enhancement (SECURE) Act introduced changes to long-standing rules that apply to retirement accounts inherited by a non-spouse beneficiary. The new rules generally apply to beneficiaries that inherit an IRA on or after January 1, 2020. 

One such change was the elimination of the “stretch IRA” for most non-spouse designated beneficiaries and the introduction of a “10-Year Rule,” thus requiring certain non-spouse beneficiaries to liquidate the entire balance of their inherited retirement account within ten years after the account owner’s death.

What is a SEP IRA?
A Simplified Employee Pension Plan (SEP) IRA enables small a business owner to offer a flexible, low-maintenance, and cost-effective retirement savings plan, while receiving a federal tax deduction.⁵

How does a SEP IRA work?
An employer may establish a SEP for its employees by completing IRS Form 5305-SEP. The employer then informs eligible employees of the SEP IRA and subsequently, a SEP-IRA must be established by, or for, each eligible employee.

Employers may, but are not required, to contribute to the SEP each year.  If the employer makes a contribution for the year, it must be made to each eligible employee.  Annual employer contributions may not exceed the lesser 25% of eligible employee’s compensation or, the IRS annual dollar limit, which for 2025 is $70,000.

Who should consider a SEP IRA?

• Business owner who wants to reduce current taxes 
• Business owner looking for a flexible and low-cost retirement savings program
• Business owner who wants to attract and reward employees by offering an attractive retirement savings option
• Business owner who wants contribution flexibility. SEP-IRA contributions are discretionary.

What type of business is eligible to establish a SEP IRA?
A SEP may be established by any of the following business types:

• Sole proprietor
• Self-employed
• Partnership
• Limited Liability Corporation (LLC)
• Nonprofit

Who is an eligible employee?
An employer must include any employee who satisfies the following criteria:

• Worked for the employer for at least three of the preceding five years
• Earned at least $750 in compensation from the employer during 2025
• Attained age 21

An employer may, but is not required, to cover the following employees:

• Employees who do not satisfy the age and service requirements (see above)
• Employees covered by a collective bargaining agreement

How much can be contributed to a SEP IRA?
A SEP-IRA is funded solely with employer contributions that are immediately vested.

Employer contributions are limited to the lesser of:

• 25% of compensation; or
• $70,000 (2025)

Beginning January 1, 2023, an employer sponsoring a SEP IRA may offer eligible employees the ability to designate SEP-IRA contributions as Roth contributions.

When can contributions be made?
A business owner can establish and contribute to a SEP IRA for a particular year as late as their business tax-filing deadline plus extension for such taxable year.

Can an investor roll over a retirement account into a SEP IRA?
A SEP IRA can accept a rollover from most workplace retirement plans, including another SEP- IRA, SIMPLE IRA, 401(k), 403(b), and 457(b) government plans.

Our flyer shows which retirement accounts are eligible for a rollover.

Can an investor contribute to both a SEP IRA and traditional IRA?
A traditional IRA contribution is in addition to any contribution an employer makes to an employee’s SEP-IRA. In 2025, the traditional IRA contribution limit is $7,000, or $8,000 for those investors age 50 and over.

The same rules and contribution limits apply if an investor qualifies to fund a Roth IRA.

Is a SEP IRA contribution tax deductible to the employee?
No.  A SEP IRA is funded solely with employer contributions.

A SARSEP IRA was previously available as a retirement plan option for a small business owner. A SARSEP allowed eligible employees to make pre-tax salary deferrals up to certain limits. However, a new SARSEP cannot be established after December 31, 1996, although previously established accounts are grandfathered. 

What types of distributions can be taken from a SEP?
There are several distribution types that can be taken from a SEP-IRA. We briefly summarize each distribution type below:

• Normal distribution occurs after the owner attains age 59½. A normal distribution is generally subject to taxation in the year withdrawn, but the 10% early withdrawal penalty tax does not apply.
• Premature distribution (without an exception) occurs upon the owner withdrawing funds before age 59½, and an exception does not apply. The distribution is both taxable and subject to a 10% penalty tax.
• Premature distribution (with an exception) occurs upon the owner withdrawing funds before age 59½ and satisfying an exception. Although the distribution is subject to taxation, the 10% penalty tax does not apply

The following are common exceptions to the 10% penalty tax on early withdrawals:

• Substantially equal periodic payments (“Rule 72(t)”)
• Qualifying disability
• Death of the IRA owner
• Qualified higher education expenses
• A distribution that is no more than the amount paid for health insurance premiums after receiving unemployment benefits for more than 12 weeks
• Unreimbursed medical expenses (greater than 7.5% of adjusted gross income)
• First-time home purchase (lifetime limit of $10,000) 
• Qualified birth or adoption
• Qualified reservist
• IRS levy
• Federally declared disaster
• Terminal illness
• Domestic Abuse
• Required minimum distribution (RMD)
  
• 60-day withdrawal and rollover

What are the minimum distribution requirements?
A SEP-IRA account owner must receive a required minimum distribution (an “RMD”) the year he or she attains the applicable age as follows:

• Age 72 for individuals who attain age 72 on or prior to December 31, 2022
• Age 73 for individuals who attain age 72 after December 31, 2022, and before January 1, 2033
• Age 75 for individuals who attain age 74 after December 31, 2032

The RMD rules permit the initial minimum distribution to be deferred until April 1 of the following year. Delaying an initial RMD requires the account owner to take two RMDs the following year.  An RMD must be taken annually thereafter.

If the full RMD is not taken each year, a 25% penalty tax is assessed on the amount that should have been received. However, if the missed RMD is corrected by the end of the second taxable year after the year in which the RMD should have been made, the penalty tax is reduced to 10%. See our calculator to determine your RMD.

An individual age 72 or older is eligible to participate, assuming SEP IRA eligibility requirements have been satisfied. However, the individual must also take required minimum distributions.

What is a 60-day withdrawal and rollover?
Once in a 12-month period (not calendar year), a SEP-IRA owner may withdraw any amount, for any reason, from any of their IRAs, and repay the funds within 60 days without being subject to taxation or an early withdrawal penalty. If not repaid within their 60-day window, the SEP-IRA owner will be subject to taxation and potential penalties.

The one IRA rollover per year applies on a per-taxpayer basis. Therefore, a SEP-IRAowner can elect a single 60-day withdrawal and rollover in a 12-month period regardless of the number or type of IRAs owned.³

What death benefits are available from a SEP IRA?

When a SEP-IRA account owner dies, an inherited IRA is established. However, the treatment of an inherited IRA differs, depending on who inherits the account.

Please note that the rules applicable to inherited IRAs are complex and vary substantially depending on facts and circumstances. The general rules set forth below are not intended as legal, financial, or tax advice and we recommend that you consult with your advisor or tax professional based on your individual situation.

Spousal beneficiary:

A spousal beneficiary has the following options available upon inheriting a SEP-IRA:

• Treat the IRA as his or her own IRA
• Roll over the IRA into his or her own IRA
• Transfer the IRA to an employer-sponsored retirement plan where he or she is a participant
• Remain a beneficiary
• Elect to be treated as the deceased spouse (i.e., delay required minimum distributions until the year in which the deceased spouse would have reached age 73)

Non-Spouse Beneficiary: 
The Setting Every Community for Retirement Enhancement (SECURE) Act introduced changes to long-standing rules that apply to retirement accounts inherited by a non-spouse beneficiary. The new rules generally apply to beneficiaries that inherit an IRA on or after January 1, 2020. 

One such change was the elimination of the “stretch IRA” for most non-spouse designated beneficiaries and the introduction of a “10-Year Rule,” thus requiring certain non-spouse beneficiaries to liquidate the entire balance of their inherited retirement account within ten years after the account owner’s death.

Can I convert a SEP-IRA to a Roth IRA?
Yes. Investors regardless of age and/or income are eligible to convert all or a portion of their assets to a Roth IRA. Distributing pre-tax IRA assets to a Roth IRA via a conversion is a taxable event, subject to taxation in the year the conversion takes place. 

What is a Coverdell Education Savings Account (“Coverdell ESA”)?
A Coverdell ESA is a tax-advantaged account that helps families save for a child’s education—K-12 and higher education. Contributions to an ESA are made with after-tax dollars; however, funds used to pay for qualified education expenses are distributed tax-free. Qualified education expenses, for example, include tuition, fees, and books.

How does a Coverdell ESA work?
An eligible individual can contribute up to $2,000 per year, per child to a Coverdell ESA. The individual or entity making the contribution (donor) can be anyone, including the student. However, the donor must satisfy certain income requirements. Withdrawals, including earnings, are distributed tax-free, provided the funds are used to pay for qualified education expenses.

Who should consider a Coverdell ESA?

• An individual who wants to save on a tax-advantaged basis for a child’s education
• An individual seeking withdrawal flexibility—qualified education expenses include elementary, secondary and higher education
• An individual seeking a broad range of investments 

Who is eligible to establish a Coverdell ESA?
Eligibility requires that a donor satisfy an annual income test. The $2,000 maximum contribution is dependent on tax filing status and modified adjusted gross income (MAGI). Joint filers with MAGI of $190,000 or less ($95,000 or less for single filers) can contribute $2,000. Contribution limits are reduced as MAGI increases and are completely phased out for joint filers with MAGI of $220,000 or more ($110,000 or more for single filers). Contributions cannot be made after the beneficiary reaches age 18 unless the beneficiary is a special needs student.⁶

An eligible donor can be anyone related or unrelated to the beneficiary. Once a contribution is made, the account custodian is required to be the child’s parent or legal guardian.

Distributions, including earnings, used to pay for qualified education expenses are exempt from federal income tax. Additionally, a Coverdell ESA must be exhausted within 30 days after the beneficiary attains age 30, unless the beneficiary is a special needs student.

Funds that are not used for qualified education expenses must otherwise be distributed to the beneficiary, subjecting the earnings to federal income tax and a 10% penalty tax.

Eligibility Requirements

Tax filing	Modified Adjusted Gross Income (MAGI)2	Contribution Amount
Married filing Jointly	$190,000 or less	$2,000
	$190,001 to $220,000	Pro-rated
	More than $220,000	Ineligible
Single	$95,000 or less	$2,000
	$95,001 to $110,000	Pro-rated
	More than $110,000	Ineligible

What is the Coverdell ESA contribution limit?
Each beneficiary, regardless of the number of donors, can receive a Coverdell ESA contribution totaling $2,000 annually. Contributions must be made prior to the beneficiary attaining age 18, unless the beneficiary is a special needs student.

Who can make a Coverdell ESA contribution?
Any donor that satisfies certain income requirements is eligible to make contributions to a Coverdell ESA.

What happens if a contribution exceeds the limit?
If the contribution limit is exceeded, the excess must be removed. Any excess must generally be removed by June 1 following the year in which the contribution was made. If the excess is not removed, the designated beneficiary will be assessed a 6% penalty tax each year the excess remains in the account.

When can a Coverdell ESA distribution be made?
The designated beneficiary of a Coverdell ESA may take a distribution for a qualified education expense at any time.  However, amounts remaining in the Coverdell ESA must be distributed within 30 days after the beneficiary attains age 30, unless the beneficiary is a special needs student.⁶

Can unused Coverdell ESA funds be transferred to another family member?
Unused funds can be transferred to another family member² of the beneficiary who is not 30 years old or is a special needs student, regardless of age.

What types of distributions are qualified education expenses?
Qualified Coverdell ESA distributions include the following:

• Tuition, fees, and tutoring
• Special needs services for a special needs student
• Books, supplies, and equipment
• Room and board, uniforms, transportation, and other required supplementary items

A Lord Abbett Payroll Deduction IRA allows employees to automatically deposit a portion of their paycheck into a traditional IRA, Roth IRA, or Coverdell Educational Savings Account.

1. Each eligible employee determines account type.

2. Each eligible employee completes an IRA application and Payroll Deduction investment form. 

3. Each eligible employee determines amount to be deducted from the employee's paycheck.

4. Employer transmits employee contributions to Lord Abbett.

Please contact Lord Abbett at 888-522-2388 for additional information about establishing a Payroll Deduction IRA.

• Business owner that wants to offer a no-cost retirement savings plan
• Business owner that wants to offer a retirement savings plan with minimal administrative oversight
• Business owner who wants to offer a retirement savings plan that does not require employer contributions

A Payroll Deduction IRA offers employees several benefits, including:

• Automatic investment—IRA contributions are made via payroll deductions
• All employee contributions are 100% immediately vested
• No account fees 
• Flexibility—contribution amount can change at any time.

A business owner and all employees who have received taxable compensation.

An eligible individua can contribute up to the maximum allowable limits depending on the account type selected. In 2025, the traditional IRA or Roth IRA contribution limit is $7,000 plus a catch-up contribution of $1,000 for those individuals age 50 or older. The maximum Coverdell Educational Savings Account contribution is $2,000.