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Can you do both? I know that you can't do a Roth + Traditional IRA in
the same year, but can you fund both a SEP-IRA as well as a Roth
in the same year?

Thanks,

--Foobarista
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Can you do both? I know that you can't do a Roth + Traditional IRA in
the same year, but can you fund both a SEP-IRA as well as a Roth
in the same year?


You know wrong. You can contribute to both a Roth and a traditional IRA in the same year as long as the total contributions don't exceed $3000 ($3500 if age 50 or more). Why anyone would choose to split their contribution between Roth and traditional, however, is a separate question -- one which I can't find a credible answer to.

A SEP-IRA is a hybrid account. It consists of an employer contribution (the SEP portion) grafted onto a traditional IRA. You, as employer, or your employer (if you are an employee) can contribute a percentage of profits to the SEP-IRA. You, as employee, can contribute up to $3000 (or $3500) to the same SEP-IRA account, or to any other IRA account you have.

Full details can be found in IRS Pub. 590, Individual Retirement Arrangements (IRAs). You can get it here: www.irs.gov/pub/irs-pdf/p590.pdf

Ira
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Why anyone would choose to split their contribution between Roth and traditional, however, is a separate question -- one which I can't find a credible answer to.

I don't believe in using withholding as a forced savings plan. DH and I have a tendency to earn odd amounts here and here that make calculating withholding iffy. Sometimes I only need to put $1,000 ot $2,000 into our traditional IRAs to make tax owed $0, the rest goes to the Roth accounts.

I keep both traditional and Roth accounts going because I haven't seen anywhere where the government has promised, cross its heart, never EVER to tax Roth distributions, no matter how bad the deficit gets. I have 23 years to go at least and a lot can happen in that time.

Barbara
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Why anyone would choose to split their contribution between Roth and traditional, however, is a separate question -- one which I can't find a credible answer to.

I don't believe in using withholding as a forced savings plan. DH and I have a tendency to earn odd amounts here and here that make calculating withholding iffy. Sometimes I only need to put $1,000 ot $2,000 into our traditional IRAs to make tax owed $0, the rest goes to the Roth accounts.

I keep both traditional and Roth accounts going because I haven't seen anywhere where the government has promised, cross its heart, never EVER to tax Roth distributions, no matter how bad the deficit gets. I have 23 years to go at least and a lot can happen in that time.


I agree that there is no guarantee that Roth distributions will remain tax free forever. However, there are still other benefits to the Roth. First, you do not have to begin taking distributions at age 70 1/2. Next, if Congress doesn't make any changes, a Roth IRA passed to heirs remains tax free throughout the heirs' lifetimes.

There's also the problem that if there are no changes to the Roth rules in the future, you will only be able to convert your traditional IRA to a Roth if your AGI is below $100K and you'll need to find the larger amount of tax dollars out of non-retirement funds. In other words, although there is no difference in the effect on your net worth no matter when you make the conversion (assuming constant marginal tax rates) it may be more difficult to meet the greater tax liability in future years without a source of disposible funds.

Finally, while no one can ever predict what Congress will do, even if Roth distributions were made taxable in the future, Congress will have to make distributions of contributions tax-free since they were taxed before they entered the Roth IRA. The effect would be to turn the Roth IRA into a traditional IRA with basis.

Ira
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Why anyone would choose to split their contribution between Roth and traditional, however, is a separate question -- one which I can't find a credible answer to.

One possible reason would be if your AGI was between $150k and $160k where Roth contributions are reduced. The question would then be why use the traditional IRA instead of a taxable investment account.

IF
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You know wrong. You can contribute to both a Roth and a traditional IRA in the same year as long as the total contributions don't exceed $3000 ($3500 if age 50 or more). Why anyone would choose to split their contribution between Roth and traditional, however, is a separate question -- one which I can't find a credible answer to.


OK - I actually knew this but it seems such an off-the-wall situation
that I basically forget it. Anyway, I still have the question, which
is _not_ answered, at least not explicitly, by Pub 590: can we
fully fund a Roth IRA in the same year as we contribute to a SEP-IRA?
(ignoring AGI stuff, etc - we don't have enough income this year for
that to be an issue). I guess the root of my question is whether a
SEP-IRA is more like a Traditional IRA (and with a contribution max of
$40K, it sure don't look like one), or a 401K? You can have a 401K
and a fully-funded Roth in the same year, but not a fully funded $3K
Roth + a funded Traditional.

Thanks for pointing me at Pub 590.

--Foobarista
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Even though a SEP is not a qualified plan the same rukes as 401(k) applies. You can do a Roth plus a SEP as long as your income level allows you to make contributions. $100,000 single and $150,000 MFJ.

Deductible IRA limits are much lower (40k single)
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