SEP IRA acct as first stop for backdoor Roth IRA contribution, or open traditional IRA acct?

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epicwinter
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Joined: Thu Mar 14, 2019 12:28 pm

SEP IRA acct as first stop for backdoor Roth IRA contribution, or open traditional IRA acct?

Post by epicwinter » Thu Mar 14, 2019 12:56 pm

I have an old SEP IRA account that has no balances (rolled them into an employer sponsored 401k in a previous calendar year so that I could effect backdoor Roth IRA contribution, and have no further forseeable need for the SEP IRA based on change in employment status to W2, but have kept it open just in case I might use or need it in the furture).

I don't have a traditional IRA account presently (but could open one at Fidelity, where I have other accounts, including Roth IRA).

Could I use the SEP IRA account as the taxable account to which to make the initial 2019 IRA contribution, then roll it over to the Roth IRA the following day and not experience any adverse consequences, or should I open a traditional IRA account to which to make the initial contribution for the subsequent backdoor Roth rollover?

Thanks!

SRenaeP
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Joined: Tue Jan 19, 2010 9:05 pm

Re: SEP IRA acct as first stop for backdoor Roth IRA contribution, or open traditional IRA acct?

Post by SRenaeP » Thu Mar 14, 2019 2:02 pm

Do you have self-employment/Schedule C income to qualify for contributing to a SEP IRA?

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: SEP IRA acct as first stop for backdoor Roth IRA contribution, or open traditional IRA acct?

Post by Duckie » Thu Mar 14, 2019 4:39 pm

epicwinter wrote:Could I use the SEP IRA account as the taxable account to which to make the initial 2019 IRA contribution, then roll it over to the Roth IRA the following day and not experience any adverse consequences,
Could you contribute to the SEP IRA and convert to the Roth IRA? Yes, but...
or should I open a traditional IRA account to which to make the initial contribution for the subsequent backdoor Roth rollover?
I believe it is better to keep employer plans like SEP IRAs separate from personal plans like TIRAs. So I recommend you open a TIRA for the backdoor Roth method. I would also close the empty SEP IRA just to simplify things.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: SEP IRA acct as first stop for backdoor Roth IRA contribution, or open traditional IRA acct?

Post by Spirit Rider » Thu Mar 14, 2019 7:57 pm

I agree with @Duckie.

While a SEP IRA can accept traditional IRA contributions. You must proactively identify it as a traditional IRA contribution and the custodian must track it as a traditional IRA contribution. Too many things to go wrong in my mind.

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