Monday, March 05, 2007

Me And My SEP

So I just set up an SEP-IRA for myself, partially because then I can contribute for last year, and knock a good chunk off the taxes I owe, and because I came across this wonderful bit of logic from Five Cent Nickel:

As I noted above, you can contribute to your SEP-IRA as either the employer, the employee, or both. In the case of the latter, it counts against your annual IRA contribution limit, so it reduces the amount that you can contribute to a traditional or Roth IRA. But in the case of the former, there’s no effect on your annual IRA contribution limit. Thus, it seems that you can use employer contributions to your SEP-IRA as a way of legally exceeding the IRS contribution limits.


See, an SEP can't be set up as a Roth, but you can still deduct it from your taxes, and you can contribute up to 25% of what your business makes each year. So I can contribute my money to either the SEP or into my workplace accounts, and it doesn't make any difference. This is attractive because depositing into my workplace accounts can't exactly be done when I have a bit of spare cash - I have to fill out a form and hope they process it before my next paycheck. ALSO, I could roll it over into a Roth whenever I pleased, and I'm not limited to waiting until I leave this job. So I could have my 403b, my 457b, my Roth IRA, AND my SEP IRA.. drool. (I'm definitely in the savings-is-addictive club.)

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