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SEP vs ROTH IRA

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  • SEP vs ROTH IRA

    My wife and I both receive W2s but we also do some contracted work for which we receive 1099s.  We both have a Roth(from when we were in residency) and a SEP.  I am trying to figure going forward if I should contribute to the SEP or convert the SEP to a Roth and then do backdoor Roth's from here on out.

  • #2
    Whether to convert now would completely depend on your income IMO (sounds higher though since you're talking about backdoor Rothing).  You can roll the SEPs into individual 401ks, leave the money there, and going forward do a backdoor Roth (avoids the pro rata rule because now the SEPs have zero balance).

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    • #3
      Would there be any benefit to continue contributing to the SEP rather than doing a back door ROTH?

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      • #4




        Would there be any benefit to continue contributing to the SEP rather than doing a back door ROTH?
        Click to expand...


        The two are not mutually exclusive.  You can do both.  But I would advise setting up an individual 401k, rolling your SEP money into that, moving forward contributing to both your i401k AND doing a backdoor Roth.

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        • #5
          I vote both - but can the SEP and open a solo K instead. Converting SEP to a Roth means paying taxes at your marginal tax rate. Not sure why you'd want to do that unless in a low income year. I wrote a 2 part series on the Solo K and why it's better than the SEP.

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          • #6




            My wife and I both receive W2s but we also do some contracted work for which we receive 1099s.  We both have a Roth(from when we were in residency) and a SEP.  I am trying to figure going forward if I should contribute to the SEP or convert the SEP to a Roth and then do backdoor Roth’s from here on out.
            Click to expand...


            Miss Bonnie MD is correct. The only reason to choose SEP over SOLO-k is if you can contribute for the prior year (in case you're not aware, you have until 10/15/17 to establish and contribute to a SEP for 2016. You then would have until 12/31/17 to roll it into a SOLO-k or convert to a Roth to be able to do a tax-free backdoor Roth conversion in 2017. In addition to the post she mentioned, you may find these educational:
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Independent/solo 401(k) and backdoor Roth IRA, imo

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