racelariParticipantStatus: PhysicianPosts: 12Joined: 03/10/2019
Hi guys I was wondering if I can use a SEP-IRA to do Roth conversions instead of using a traditional IRA? The reason I opened a SEP-IRA was I only read WCI earlier this year, learned a crapload including that it was too late to open a solo 401K to make tax deductible contributions from my 1099 income for 2018, but the SEP-IRA I could open in 2019 and still make tax deductible contributions from my 2018 1099 income before tax day. Just in case it matters my main job is W2 income which has a 403b that I max out.
Currently I am now in the process of opening a solo 401k and will rollover the SEP-IRA money into the solo 401K. I will then starting this year 2019 use the solo 401K to make tax deductible contributions from my 1099 income. Can I then just keep the SEP-IRA open, put 6K in there each year and convert into a Roth IRA? Or do I need to close the SEP-IRA, open up a traditional IRA, and then do the Roth conversions that way?
Thanks!May 9, 2019 at 9:11 am MST #213445PedsParticipantStatus: PhysicianPosts: 3614Joined: 01/08/2016
no. they are separate.May 9, 2019 at 9:28 am MST #213451mb(a)CPAParticipantStatus: AccountantPosts: 7Joined: 04/01/2019
Peds is right. You would need to make future backdoor contributions to a traditional IRA (NOT the SEP-IRA) that will be converted over to Roth.May 9, 2019 at 6:45 pm MST #213580GasFIREParticipantStatus: PhysicianPosts: 170Joined: 01/08/2018
You cannot use the SEP-IRA for the Backdoor Roth IRA, you need to use a tIRA. However you can use the SEP-IRA to do the Mega Backdoor Roth IRA as WCI explains in Variation 2 in this post:
Not saying you should, that would depend how much you have in the SEP-IRA and your current tax bracket, but you could.May 9, 2019 at 7:09 pm MST #213593PhysicianOnFIREModeratorStatus: PhysicianPosts: 1505Joined: 01/08/2016
You can convert a SEP IRA to Roth, but there’s nothing backdoor about it. Prepare to pay taxes at your marginal rate. It could be worth it, but the Backdoor Roth is a different animal. I did convert a large SEP IRA, and I’m still not sure if it was the best idea.
40-something anesthesiologist and personal finance blogger @ https://physicianonfire.com [Part of the WCI Network] Find me on Twitter: @physicianonfire
FIRE. Financial Independence. Retire Early.May 9, 2019 at 8:48 pm MST #213601