2 steps to larger Roth Contribution?... - Ed Slott and Company, LLC

Submitted by Bill Oakley on Wed, 2010-01-20 05:00

I am a financial advisor and probably will not be able to contribute to my own Roth in 2010 because of the income restrictions. I do not have a traditional IRA or any other type of deductible Qualified account because I decided to just start with the Roth. Would it be possible going forward to contribute to a SEP up to the maximum amount ($49k) and converting the entire amount to a Roth after the fact (obviously paying the taxes on the whole thing that year)? Wouldn’t that effectively allow me, or anyone else who is self employed, to “contribute” up to $49k of new money per year to a Roth despite all of the income contribution restrictions? Thanks for the feedback.

Bill in FL

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Permalink Submitted by Anonymous (not verified) on Wed, 2010-01-20 17:26

If you have no other qualified plan, are self-employed and can fund a SEP, I don’t see why this would not work. Ofcourse, you will need to have compensation of at least 196K to reach the 49K (smaller of 25% of compensation or 49K). If you have employees you must also fund their accounts, although you may put some restrictions on them (see IRS Form 5305).

pmk

Permalink Submitted by Bill Oakley on Mon, 2010-02-01 21:42

Thanks for the follow up.
Bill