SEP IRA

Archive for June, 2009

What is the Contribution limit on multiple retirement plans with one employer?

are salary deferral plans that are funded with employee contributions.

• Money purchase,
• profit sharing, and
• SEP IRA plans are

employer-funded retirement plans.

If one employer establishes a combination of salary deferral and employer-funded retirement plans, the combined limit is $44,000 in 2006.

In 2006, an employee can defer $15,000 into a salary deferral plan and have $29,000 contributed by the employer into an employer-funded retirement plan.

The employer cannot fund a SIMPLE IRA plan along with another retirement plan in the same year.

What is the Contribution limit on multiple plans with multiple employers?

If you have earned income from multiple unrelated employers, including being self-employed, you can have

a maximum of up to 25% of compensation or $44,000 contributed into plans for each employer

Example 1:

Mr. Smith has a money purchase or profit sharing plan by his employer at work and also has self-employment income. Even though he is a participant in his employer’s retirement plan, he is also able to establish a retirement plan for his self-employment income up to $44,000 or 25% of net self-employment income.

Example 2:

In 2006, an individual works at two jobs. Employer 1 has a 401k plan and Employer 2 has a money purchase plan. The individual can defer $15,000 into his/her 401k plan at job 1 and if, the individual’s compensation is high enough, his employer can contribute $44,000 into his/her money purchase plan at job 2, assuming the employers are unrelated.

If an employee is covered by an employer retirement plan can he/she still contribute to Traditional IRA and Roth IRA?

Even if an employee is covered by a retirement plan, he/she may still be eligible to make traditional or Roth IRA contributions (age or income limits may apply).

Question: How soon after contributing to a traditional IRA can I convert it to a Roth IRA?

Can I do it immediately? Part of the reason why I ask is because I want to contribute to a SEP IRA and then convert that to Roth also. The other reason is I realized for this year I won’t make more than 105K. I know net year it won’t matter (2010)

Answer: I used to work in a brokerage firm and unless things have changed since 2004, you are able to do it immediately and as many times as you like without penalty. Of course, by “immediately” if this is a brand new account, you would have to wait for the paperwork or whatever to get set up first… but from a legal point of view, it is “immediately.” Just ask your broker or human resources, or whoever that you have managing the account.

Financial Services Temecula CA: Life Insurance, Investments, Mutual Funds, 401k, IRA, Annuity

Question: How does my employer contributions to a SEP IRA impact my Traditional IRA?

First, I do not need a link to an IRA FAQ that talks about various circumstances governing IRA contributions. Read my question and answer it, do not answer an imaginary generalized IRA question.

I just want to know, do contributions to an SEP IRA by my employer have any impact on my ability to fund a Traditional IRA to the normal limit and deduct my contributions. Assume that if the SEP IRA didn’t exist, I could contribute and deduct the full 4000 this year.

Answer: It doesn’t. The Contribution to the SEP is not made by you but by your employer even though the SEP-IRA account is in your name.