Friday, October 14, 2011

Can I convert part of an active SEP to a Roth IRA?

Q: I have an active SEP (Simplified Employee Pension) IRA. I’ve been hearing about the positives involved with Roth IRAs and would like to take advantage of the tax-free savings as soon as possible. Can I convert part of it to a Roth IRA right now?

A: As long as the SEP agreement allows you access to the funds (and most SEPs will allow you access), you can do a conversion from the SEP account to a Roth IRA. If you will be receiving future SEP contributions in the account, make sure that you leave enough money in the account to keep it active. Enjoy the benefits of a Roth IRA and make sure you have enough outside money to pay the tax on the conversion.

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