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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: of 76418  
Subject: Re: Start a SEP again? Date: 9/28/1998 2:31 PM
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KCofMaine wrote:
<<QUESTION: May I start another SEP??>>

You never stopped having a SEP IRA! You just stopped making SEP contributions...

<<If "yes," then...
1. Can I do both a Roth IRA for me and a SEP?>>

SEP IRA contributions are effectively employer contributions into an employee IRA. Roth IRA's are personal-only. Even though in your case employer and employee are one in the same entity, for tax purposes there is a logical seperation.

<<2. Must I stop the Roth IRA before beginning a SEP?>>

By the answer to #1 - no need!

<<3. If I stopped contributing to the Roth IRA, and started up a new SEP, could I invest the maximum allowable SEP contribution based on this year's income figures...even though I have contributed 3/4ths of my allowable Roth IRA contribution for the year??>>

You can make a SEP contribution of 13.5% of your gross earnings, up to some limit ($24k or somesuch). That's on the business side of things! You can make a Roth-IRA contribution of up to $2k of earned income on the personal side, up to certain income limits. These are seperate items for tax purposes.

Note that if you have a qualified employer-supplied pension plan (including a SEP-IRA plan), this can limit your deductable contributions to your personal IRA. But the fact that it's a _SEP_ plan and you're the employer and the employed has no bearing on this. SEP's are just like 401(k)'s and other plans in this respect.

Also, you might want to look at the SIMPLE IRA plan. This is a recently (97, I think) created alternative to SEP-IRA's. You can contribute up to $6k of earnings, which is better than a SEP for those with lower earnings. SEP becomes a better deal at around $45k ($6000/.135==$44444.44).

Later,
scott
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