How to Transfer a SEP IRA to an Annuity
Jason Stolz CLTC, CRPC
How to Transfer a SEP IRA to an Annuity is a key strategy for business owners and self-employed professionals who want to convert their accumulated savings into guaranteed retirement income. A trustee-to-trustee transfer allows SEP IRA funds to move directly to a qualified annuity without taxes or penalties. This page explains how the process works, how to stay compliant, and why an annuity can help stabilize your post-business income.
At Diversified Insurance Brokers, our advisors routinely help small-business owners and 1099 professionals complete direct transfers from SEP IRAs to annuities. We compare top carriers and products to find the right balance between safety, growth, and predictable income—all while maintaining tax-deferred status.
Free SEP IRA-to-Annuity Transfer Review
Learn how to move SEP IRA funds tax-free, protect your principal, and create steady retirement income for life.
Why Transfer a SEP IRA to an Annuity?
A SEP IRA provides valuable tax-deferred growth for self-employed individuals and small-business owners. However, it lacks income guarantees. Transferring to an annuity can help you:
- Guarantee lifetime income: Convert savings into predictable monthly income that lasts as long as you live.
- Maintain tax deferral: Funds stay within the qualified system with no current taxation.
- Protect against market losses: Fixed and indexed annuities secure your principal while allowing potential growth.
- Ensure continuity for your spouse: Joint-life options keep income flowing for both partners.
- Ease future administration: Simplify multiple SEP accounts by consolidating into a single annuity contract.
How the SEP IRA-to-Annuity Transfer Works
The process is straightforward but must be handled correctly to remain tax-free. Your current custodian sends funds directly to the annuity provider using a trustee-to-trustee transfer. You never take possession of the money, which ensures IRS compliance and uninterrupted tax deferral.
| Step | Action | Benefit |
|---|---|---|
| 1. Review current SEP IRA | Confirm eligibility for rollover and verify no employer restrictions remain on contributions. | Ensures a smooth, penalty-free transfer. |
| 2. Select annuity type | Choose from fixed, indexed, or income annuities based on your business exit timeline and retirement goals. | Aligns guarantees and liquidity with your strategy. |
| 3. Submit transfer request | Your advisor coordinates both custodians to initiate a direct movement of funds. | Keeps funds qualified and avoids taxation. |
| 4. Contract activated | The insurer deposits your funds and begins crediting guaranteed interest or indexed earnings. | Your money continues compounding tax-deferred. |
Estimate Income from Your SEP IRA
Tax Rules for SEP IRA Transfers
A properly executed trustee-to-trustee transfer is not a taxable event. If you receive the check personally and fail to redeposit within 60 days, the IRS will treat it as a distribution—triggering income tax and possible early-withdrawal penalties. Always allow your new annuity custodian to handle the transfer directly.
Once transferred, your SEP IRA annuity continues to grow tax-deferred, and required minimum distributions (RMDs) can be automatically satisfied through income payments if desired.
Benefits of Converting a SEP IRA to an Annuity
- Predictable retirement paychecks: Receive guaranteed income that supplements Social Security and other plans.
- Asset protection: Safeguard decades of business contributions from market risk.
- Tax deferral continuation: Maintain the same pre-tax status inside the annuity.
- Succession flexibility: Name individual or spousal beneficiaries for legacy planning.
For a broader comparison of income potential, visit How Much Income Does an Annuity Pay?
Plan Your SEP IRA-to-Annuity Transfer Today
Turn your business retirement savings into guaranteed income and preserve your tax advantages.
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FAQs: Transferring a SEP IRA to an Annuity
Is transferring a SEP IRA to an annuity taxable?
No. A trustee-to-trustee transfer between qualified accounts keeps your SEP IRA tax-deferred with no penalties.
Can I transfer part of my SEP IRA into an annuity?
Yes. Many business owners choose a partial transfer to secure guaranteed income while keeping other funds invested elsewhere.
Does a SEP IRA annuity continue to grow tax-deferred?
Yes. Your funds remain within a qualified account and continue compounding without current taxation until withdrawn.
Do SEP IRAs have Required Minimum Distributions?
Yes. Once you reach RMD age, most annuities can automatically satisfy required distributions through your income stream.
What type of annuity is best for SEP IRA funds?
It depends on your goals—MYGAs for fixed growth, indexed annuities for principal protection with upside, or income annuities for guaranteed payouts.
Who qualifies to move a SEP IRA into an annuity?
Any participant or former business owner with an active SEP IRA can transfer funds, provided contributions have fully vested.
