SEP IRA

Archive for July, 2005

Question: Difference between these retirement accounts?

Spousal IRA (dont even get the point of this one)

Roth 401(k)

SIMPLE IRA

SEP IRA

Benefits and consequences of each?

Answer: Spousal IRA would be whichever type of IRA (traditional or Roth) you contribute to for a spouse, even if that spouse has no earned income. Your total combined earned income would have to be enough to cover contributions to your IRA and spouse’s IRA. It allows a couple to save more than just the IRA of the breadwinner.

Roth 401(k) is similar to Roth IRA except contributions are taken right out of your paycheck for the 401(k), subject to total 401(k) Contribution limits (higher than IRA limits). In either case contributions to either type of Roth are not deductable, but gains are never taxed (unless withdrawn too early).

Simple or SEP (simplified employee pension) IRA’s are specific to small businesses. IRS Publication 590 explains SEP or farther on explains SIMPLE IRA. Contribution limits are higher than other IRA’s, since they may need more money to start their business, and then get caught up with retirement savings.

I want you, I need you, I love you.

Question: Taking a loss on Roth IRA and contributing to SIMPLE IRA?

I closed my ROTH IRA account in 2009 to claim losses on it. Now, I have an option to contribute to SIMPLE IRA for 2009 and I am thinking about it. If I open a SIMPLE IRA now and contribute to it for 2009, will it somehow interfere with my claiming losses on Roth IRA account? I am asking because the rules say the IRA accounts has to be closed to claim losses on it so I am concerned that if I open another IRA account it might somehow set a red flag at IRS.
Thanks.

Answer: If you closed *all* of your Roth accounts and can show that the total distributed was less than the amount of after-tax money you put in, you can deduct the loss on schedule A in the 2% section. For most people, this is worthless deduction.

Opening a new IRA is not the same as rolling the money over. Nor is it a Roth account, so you still meet the test that all Roths have been closed.