Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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DW and I are each 60 years old, file jointly and are well below Roth contribution income limit. We are self-employed and contribute the maximum to SEPs each year. The way I read it, we are still eligible to contribute $6,500 each to individual Roth accounts on top of whatever goes to SEPs. Am I correct?
Correct, to Roth IRAs specifically...
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The SEP IRA is an employer plan with the employer contributing via payroll. The employee makes no contributions/deferrals from payroll. But the employee is allowed to make personal contributions to the SEP IRA. However, those personal contributions are the same as what could be contributed to a Traditional IRA. It's just going into the SEP IRA instead of the TIRA. So if you make a personal contribution by check of $5.5K to your SEP IRA (and you're under 50) you can't contribute anything to a TIRA or Roth IRA for that year.FiveK wrote: ↑Sat Aug 12, 2017 12:10 pmWhy doesn't "any dollars you contribute to the SEP-IRA will reduce the amount you can contribute to other IRAs, including Roth IRAs, for the year" apply here?
In the OP's case, they are the employers, so the contributions to the SEP IRAs are completely employer funds, not personal funds. That means they can still contribute to their personal IRAs.
This assumes that "[w]e are self-employed and contribute the maximum to SEPs each year" implies only "employer" contributions are maximized, not "employer + employee" contributions - correct?
Correct. There are no employEE contributions allowed to a SEP IRA. Any personal contribution is not an employEE contribution, it doesn't go through payroll.
We're getting somewhat off in the weeds here, but it's a short thread, so....Duckie wrote: ↑Sun Aug 13, 2017 3:19 pmCorrect. There are no employEE contributions allowed to a SEP IRA. Any personal contribution is not an employEE contribution, it doesn't go through payroll.
The IRS FAQ that includes "If the SEP-IRA permits non-SEP contributions" implies that employee contributions may be allowed to a SEP IRA. Is that out of date? Or are you distinguishing people themselves from their status as an employee?
At certain brokers, including Vanguard, you CAN make "employee" contributions to a SEP rather than maintaining a separate traditional IRA and SEP IRA. "Employee" in quotes because technically you're making both traditional and SEP contributions, but it's all combined and traded as one IRA.
I am distinguishing an employee's personal contribution to the SEP IRA (which is allowed) from an employee's employEE contribution to a SEP IRA (which isn't allowed).
Although you can make a personal contribution to a SEP IRA it's better to contribute to a separate TIRA instead, mainly because of control, options, and cost.
Got it, thanks for the clarification.