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Rehash Backdoor Roth with SEP to 401k conversion

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  • Rehash Backdoor Roth with SEP to 401k conversion

    I know I read this somewhere, but can't find it.

    I am an IC with a Vanguard SEP-IRA.  I am planning on converting that to a Fidelity individual 401k.  When on the phone with Fidelity today, she asked if I had made any contributions for 2017 to my SEP and I have made 2.  She said that I couldn't set up the 401k until 2018 since the IRS won't let me have both in 2017.  I was hoping to make 2016 and 2017 individual IRA contributions then make the conversion to Roth in 2017.  Anyone have any suggestions?

  • #2
    Can you not simply withdraw your contributions? https://www.irs.gov/publications/p590a/ch01.html#en_US_2016_publink1000230703

    SEP-IRAs are subject to those same rules per Pub 560.

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    • #3
      I wouldn't trust the rep from Fidelity's opinion on if you can set up the 401k this year.  Maybe if you're lucky spiritrider will comment as s/he was very helpful when I did my rollovers and conversions this year.  Try posting this question over on Bogleheads and you may get more hits.  As for the T-IRA to R-IRA part, remember you have till tax day, April 18, to get in your nondeductible T-IRA 2016 contribution.  Don't miss that.  If you had to, you could contribute the 2016 and 2017 amounts, invest them, and then wait till your 2018 contribution to convert the whole thing to your R-IRA.  Hopefully by then the SEP issue will be settled out and rolled over.  If you end up with more gains than what you want to pay taxes on, as long as your T-IRA is your only IRA at that point, you can convert your nondeductible basis to your R-IRA and roll the gains to your solo-401k. I just completed this dual rollover and Roth conversion myself at Schwab.  Be sure you are filing Form 8606 each year to build your basis in your T-IRA.  Good luck!

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