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Subject:  Re: Conversion of SEP to Roth? Date:  11/4/2000  7:29 AM
Author:  TMFPixy Number:  25955 of 91149

Greetings, Onmyway2, and welcome. You asked:

<<My spouse is self-employed and looking to open a SEP IRA. He is 67 so only has 3 years to contribute. When he has to start taking distribution in 3 years, can the SEP be rolled into a Roth? (I understand that we would have to pay income tax on it at that point.) Would it be possible by law for him to take the distribution, pay the tax and then put the remaining into the ROTH on a yearly basis. (We won't need the distribution to live on for several years and want it to continue to grow tax free) If we can swing the taxes, we would like to get as much as possible into the Roth as soon as possible. We could do the ROTH now but the SEP allows for a larger contribution.>>

Think of the SEP as a traditional IRA in all ways because that's what it is once the employer's contribution has reached the account. That means you may transfer the money to a Roth at any time, paying the income taxes on that transfer when it occurs.

Take care when doing so after minimum required distributions (MRD) have begun at age 70 1/2, though. MRD cannot be transferred to a Roth and must be taken in the year required. Also, if taken before the year 2005,the MRD is considered the first money out of the IRA, so any transfer to a Roth must wait until MRD are taken for the year. For details, see my article "The Twilight Zone" at

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