Differences between Simplified employee Plan (SEP IRA) and Rollover IRA

[JRB]

This may be a softball question for some of you out there but can someone clarify if there is a reason to have a separate SEP IRA and rollover account open after having left self employment status and having transitioned to a W2 employee? Is there any reason not to consolidate these two accounts? If so, should the rollover IRA transfer into SEP IRA or vice versa? Curious if there are any differences in distribution terms, etc. Thanks!

[spiritrider]

With the exception of a SIMPLE IRA account < 2 years after 1st contribution, there are no distribution differences between all IRAs.

There are asset protection differences between IRA account types and source of assets.

[jfoxcpacfp]

If your current employer account (401k/403b) allows rollovers (most do), you might want to consider rolling both IRA accounts into it, That will allow you to do backdoor Roth IRA conversions without having to pay prorata taxes.

[JRB]

Thanks. Current employer offers TSP 401K which does not have real estate investing options and salary will not be high enough to do backdoor roth. Thus my thought was to maintain the current value accrued in SEP IRA and rollover IRA (preferably consolidating to 1 if there is no difference between the two) so that we could invest in VNQ within tax deferred account, while continuing to contribute to current employer TSP and Roth IRA.

[bovie]

Thanks. Current employer offers TSP 401K which does not have real estate investing options and salary will not be high enough to do backdoor roth. Thus my thought was to maintain the current value accrued in SEP IRA and rollover IRA (preferably consolidating to 1 if there is no difference between the two) so that we could invest in VNQ within tax deferred account, while continuing to contribute to current employer TSP and Roth IRA.

Your salary has nothing to do with your ability to contribute to Roth IRA via the "backdoor."

[spiritrider]

Tax inefficient higher returning assets should be one of the priorities for Roth IRAs. Why not put your VNQ allocation in your Roth IRA.

[JRB]

Tax inefficient higher returning assets should be one of the priorities for Roth IRAs. Why not put your VNQ allocation in your Roth IRA.

Appreciate your response on asset location and please correct me if I'm wrong... If following 80/20 AA, my thinking was to use tax deferred account (SEP IRA & TSP) to hold all bond and VNQ allocation while allocating 100% equities in Roth for the reason you provided. My understanding is that stock ETFs like VTI & VXUS would expect to have higher returns than VNQ. With that said there are 2 other assets I'm not sure where to place.. where would you recommend holding US stocks extended market non S&P 500 (VXF) and international stocks emerging markets (VWO)? Roth or Tax deferred SEP IRA? I also have a taxable account that I want to fill in with tax efficient options and not sure if VXF or VWO fit appropriately here. help appreciated.

[jfoxcpacfp]

Your salary has nothing to do with your ability to contribute to Roth IRA via the "backdoor."

I think what s/he means is that the income is not high enough to require using the backdoor Roth and can contribute to Roth directly, so prorata taxation is not a problem.