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Author: KCofMaine One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Roth SEP? Date: 9/26/1998 6:35 AM
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I have been trying to figure out how to get more into my Roth IRA. My wife and I are fully funding our own Roth IRAs.

I am self employed. I can do a SEP (Simplified Employee Pension Plan). I have no employees, therefore, don't need to also contribute equal amounts for others. I can give up to just a little less than 15% of my Schedule C income into such a vehicle. This vehicle seems to be pretty interchangeable with IRAs, in as much as one can convert his SEP to an IRA...no problem. I am assuming one can change from IRA to SEP too. Can he??

But the real question is this...can the SEP be set up as a Roth style, or must it always be a traditional IRA style vehicle. That is, can the SEP have Roth characteristics--no deductibility of contributions to the plan, but completely tax free growth??

Thanks for your help.

KCofMaine
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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: 5662 of 75383
Subject: Re: Roth SEP? Date: 9/26/1998 11:09 AM
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KcofMaine wrote:

I have been trying to figure out how to get more into my Roth IRA. My wife and I are fully funding our own Roth IRAs.

I am self employed. I can do a SEP (Simplified Employee Pension Plan). I have no employees, therefore, don't need to also contribute equal amounts for others. I can give up to just a little less than 15% of my Schedule C income into such a vehicle. This vehicle seems to be pretty interchangeable with IRAs, in as much as one can convert his SEP to an IRA...no problem. I am assuming one can change from IRA to SEP too. Can he??

But the real question is this...can the SEP be set up as a Roth style, or must it always be a traditional IRA style vehicle. That is, can the SEP have Roth characteristics--no deductibility of contributions to the plan, but completely tax free growth??


While a SEP can be transferred to another IRA, the reverse is not true. Once the money is removed from the SEP umbrella, it's removed permanently. Additionally, a SEP cannot be established as a Roth IRA. It's establishment under the tax code doesn't provide for that. Nice if you could, but………….. Good try, though. It shows you're thinking Foolishly.

Regards…..Pixy





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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: 5696 of 75383
Subject: Re: Roth SEP? Date: 9/28/1998 1:47 PM
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KCofMaine wrote:
<<This vehicle seems to be pretty interchangeable with IRAs, in as much as one can convert his SEP to an IRA...no problem. I am assuming one can change from IRA to SEP too.>>

I'm not sure this is a sensible question. So far as I can tell, a SEP-IRA is just an IRA. The SEP qualifier seems descriptive of how the funds enter the IRA. Quoting from the 5305-SEP contribution agreement:

Under a SEP, the employer is permitted to contribute a certain amount...to an employee's Individual Retirement Account...

The form indicates that the IRA itself is just an IRA.

<<But the real question is this...can the SEP be set up as a Roth style, or must it always be a traditional IRA style vehicle.>>

No - but, once you've captured the SEP contributions in your personal IRA, they're just personal IRA funds. You can convert them under the rules for personal IRAs. Depending on how liberal your administrator's rules are and your patience, you can convert after every contribution, or just do it four times a year or something.

Honestly, though, I can't imagine any situation in which having the money in a Roth would be worth enough to me that I'd be willing to do monthly conversions. I'd be concerned about problems with the IRA administrator, and with how the IRA would look on this activity if I were ever auditted.

Later,
scott


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Author: KCofMaine One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5698 of 75383
Subject: Re: Roth SEP? Date: 9/28/1998 2:09 PM
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Scott,
KCofMaine here...

Please forgive my complete stupidity in asking a question that was not "sensible." I should not have insulted you by asking such a question.

My apologies for the inquiry...I must have been in the wrong place, thinking that this board was for questions and answers.

KCofMaine

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