Converting SEP-IRA to a ROTH IRA
My wife is employed by a doctor who adds to her SEP-IRA every year. Can this SEP-IRA be converted to a ROTH IRA while she is still employed by the same doctor?
My wife is employed by a doctor who adds to her SEP-IRA every year. Can this SEP-IRA be converted to a ROTH IRA while she is still employed by the same doctor?
Permalink Submitted by Anonymous (not verified) on Mon, 2010-01-18 17:20
Yes. Once money is contributed to a SEP IRA, it “mirrors” a Traditional IRA.
pmk
Permalink Submitted by Richard Partin on Mon, 2010-01-18 18:34
Thanks for the quick reply. So all my wife has to do is convert the existing SEP-IRA to a Roth ira, paying the tax. The money she gets for this year can go in the ROTH IRA ,paying the tax on that also. Does this interfere with her contributing to a 2010 ROTH with the maximum of $6000.
Permalink Submitted by Anonymous (not verified) on Mon, 2010-01-18 18:58
I can expand on some of your points:
1. She can convert all of it this year. If she converts this year the amount can be taxed in 2010 or spread evenly over 2011 and 2012.
2. “the money she gets this year” I assume you mean the amount her employer contributes into the SEP? When it is in the SEP, it can be converted immediately adding to my point #1.
3. Contributions to a Roth are separate from the SEP. If by chance she also contributes to her SEP with her own money (as an individual IRA contribution), that counts against that full $6000. She probably only has the SEP for the employer to contribute?
pmk