can I use SEP-IRA to do backdoor Roth conversions?

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  • Avatar racelari 
    Status: Physician
    Posts: 16
    Joined: 03/10/2019
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    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?


    #213445 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4186
    Joined: 01/08/2016

    no. they are separate.

    #213451 Reply
    mb(a)CPA mb(a)CPA 
    Status: Accountant
    Posts: 13
    Joined: 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.

    #213580 Reply
    Avatar GasFIRE 
    Status: Physician
    Posts: 200
    Joined: 01/08/2018
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    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:

    The Mega Backdoor Roth IRA

    Not saying you should, that would depend how much you have in the SEP-IRA and your current tax bracket, but you could.

    #213593 Reply
    PhysicianOnFIRE PhysicianOnFIRE 
    Status: Physician
    Posts: 1536
    Joined: 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.

    My Mega Roth Conversion: a $212,000 mistake?


    40-something anesthesiologist and personal finance blogger @ [Part of the WCI Network] Find me on Twitter: @physicianonfire

    FIRE. Financial Independence. Retire Early.

    #213601 Reply

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