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Thanks, Pixy. A follow up question, if I may...

You replied...
>>Are you aware she may contribute to both the SEP and a Roth IRA? Contribute to both, and nothing says that in a future year she can't convert the SEP to a Roth again provided the AGI limits for that year are met and you can afford the tax bill. That's one way of getting more than $2K per year into a Roth, i.e., just do a conversion of SEP monies every year or two.>>

This sounds great, but I'm unclear how to go about doing it. If the SEP is converted to a Roth, does the SEP continue to exist with a zero balance? Or does some balance need to be left in it in order for it to remain active?

Would future conversions of funds contributed to the SEP become a separate Roth (i.e. a new Roth IRA for each conversion) or can future funds from the SEP go into the original Roth?

Last question: Am I correct in thinking that future funds contributed to the SEP, although tax deductible at the time, become taxable upon future conversion to Roth? If so, it would make sense to put $2000 in the Roth and the balance in the SEP since the Roth will grow tax free until the next conversion...yes? (OK, *that's* the last question.)

Starting to enjoy all this Foolishness,
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