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Author: xxdustyxx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: I have an IRA, what next? Date: 9/24/1998 11:39 PM
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I have an existing traditional IRA (a small part of which I will convert to a Roth this year) and no retirement plan at my full time job. I often do freelance work, 1099misc, that amounts to between $2000-$5000 a year.
Am I eligible to contribute to Keoghs/SEPs/Simple/etc.
while still adding $2000 a year to my IRA/Roth???

I've looked at the retirement plans page on this site, but can't seem to deduce whether the SEP/Simple would be included in "the total yearly $2000 contribution to all IRAs".

I know I can put money in taxable account, but wanted to see if I could sock away a little extra a year either tax deferred or tax deductible.

Any steps in the right direction would be greatly appreciated.
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Author: shess Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5635 of 76082
Subject: Re: I have an IRA, what next? Date: 9/25/1998 1:44 PM
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xxdustyxx wrote:
<<I often do freelance work, 1099misc, that amounts to between $2000-$5000 a year. Am I eligible to contribute to Keoghs/SEPs/Simple/etc.>>

Sure, either a SEP-IRA or Simple-IRA should work for you. I'd go with a Simple, unless you plan to greatly increase your freelance work. With a Simple, you should be able to deductably contribute _all_ earnings up to $6k.

[Note, I don't have a Simple - and thus haven't put this to the test. I have a SEP, which allows contributions by percentage (13.5%) of taxable income. The above paragraph is my understanding of how Simple works, though.]

<<I've looked at the retirement plans page on this site, but can't seem to deduce whether the SEP/Simple would be included in "the total yearly $2000 contribution to all IRAs".>>

No, the SEP/Simple contribution is not counted as part of the $2k. Those plans are effectively employer-sponsered plans - it just so happens that you're the employer _and_ the employed!

If you contribute to both employer-sponsered and personal IRAs, your deductable personal IRA contributions may be limited. Last time it applied to me, I was single, and below $25k taxable income had no limits, above $35k allowed no deductability on the personal IRA, and in between the personal IRA deductability phased out at $200 per $1000 of income. Those taxable income numbers have hopefully risen since then, and are also different if you're filing jointly.

At worst, you should be able to dump the entire 1099 income (up to $6k) into a Simple, and put $2k of other income into a Roth (assuming you're within _those_ income limits).

Later,
scott


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5653 of 76082
Subject: Re: I have an IRA, what next? Date: 9/26/1998 11:01 AM
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Xxdusty writes:

I have an existing traditional IRA (a small part of which I will convert to a Roth this year) and no retirement plan at my full time job. I often do freelance work, 1099misc, that amounts to between $2000-$5000 a year.
Am I eligible to contribute to Keoghs/SEPs/Simple/etc.
while still adding $2000 a year to my IRA/Roth???

I've looked at the retirement plans page on this site, but can't seem to deduce whether the SEP/Simple would be included in "the total yearly $2000 contribution to all IRAs".

I know I can put money in taxable account, but wanted to see if I could sock away a little extra a year either tax deferred or tax deductible.


Yes, your 1099 income makes you eligible for a Keogh, SEP or SIMPLE for part of that income. You should get and read IRS Publication 560, Retirement Plans of Small Business, which you can download at http://www.irs.ustreas.gov/prod/forms_pubs/index.html . You can also read a brief description of these plans in my Foolish Retirement Plan Primer at: http://www.fool.com/retirement .

401k plans and Keoghs/SEPs/SIMPLEs count only in determining whether an annual IRA contribution to a traditional IRA can be deducted for income tax purposes. If you meet AGI limits for your filing status, then you may contribute up to $2K per year to a Roth IRA. Further, you may always make a nondeductible contribution to a traditional IRA regardless of your AGI. A deduction for a traditional IRA when using a Keogh/SEP/SIMPLE is subject to phaseout based on the AGI for your filing status.

Regards….Pixy



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