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So...I would make the employer-side SEP contribution AND make the employee-side contribution (3000/3500 in 2004) as well.

So you think the deduction from taxable income is more important than tax-deferred income? Is that what you're saying? Perhaps it would help you if I told you I'm turning 53 in a few months. Does this make a difference?

No, I think both are important. The employer-side SEP contribution creates tax-defered income -- that's what an IRA is...a vehicle for tax deferred growth. It also saves on immediate taxes. For what its worth, I have SE clients in their 70's who are still making SEP-IRA contributions (employer-side) and Roth IRA contributions (employee-side) while taking their MRDs at the same time.

On the other hand, if you qualify and can afford to pay the tax associated with converting the employer-side contribution to a Roth IRA immediately, you can create a substantial tax-free income generator.

I would think funding a tax-deferred ROTH would be more important (*paying the taxes now on $3,500) and funding the SEP from my income secondary (deducting the LARGER SUM OF EARNED INCOME) would make more sense.

Roth IRAs are not tax-deferred, they are tax-free. Ordinary IRAs are tax-deferred. You really should run the numbers. If your SE income is high enough, the tax savings on the SEP-IRA contribution could fund the Roth IRA contribution.


So . . . now what am I missing?
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