patrick.net

You need to look at the rules. It is impossible for us to tell you without a lot more information.

The Roth IRA may have funds that were once been attached to an employer, but it would no longer be attached unless you are still working there. Are you sure you're not talking about a Rollover IRA that you converted to Roth or a Roth 401(k) that you rolled over into a Roth?

For the SEP-IRA -- was it your SEP-IRA or your employer's? You can only add SE income to it, I believe, if it's yours, and you can't contribute more to it if it's your employers and you don't work there any more.

The 401(k), you could easily max out without issues.

You need to check the rules for whether you are eligible for Roth (look at the qualification rules). You also need to check whether you have appropriate SE income for the SEP-IRA. The max for SEP is not $15K, by the way -- it's usually a percentage of your SE income with a cap.

Thanks. You're right about the SEP limit. I've been able to roll over 401k funds from employer B even though the IRA was set up by employer A. I've never contributed directly to it though.

The Roth IRA was indeed a rollover from employer B. I had both a 401k and some other after-tax savings vehicle which was probably a rollover IRA.

It sounds like I'll be maxing out the 401k and the Roth IRA, which along with saving up a cash cushion is hitting my target savings rate.

If you have self-employment income, you can contribute to the SEP-IRA. An example would by some business thing you do on the side.

Generally the business that employs you would not offer BOTH a 401K AND a SEP-IRA for the employees. If they do, it's probably a mistake.

Regardless, unless you exceed the income limits for Roth, you can have a Roth in addition to anything else you have.

Even if you exceed the income limits for Roth, or for deductible IRA contributions, you can still contribute to a Roth. Make the max contribution to an IRA, even though it is non deductible. Then convert the IRA to Roth IRA. This opened up in 2010 and is available for 2011 as well. I think it will continue in 2012 but not 100% sure. This can be done with or without 401(k) contributions, the $5k is on top of $16k for 401(k).

This should be good, unless the US were to replace income tax with consumption tax at retirement time. But that's unlikely.

This process works for normal employees. There may be circumstances where it can't be done so make a final check before taking the leap.

SiO2 says

Even if you exceed the income limits for Roth, or for deductible IRA contributions, you can still contribute to a Roth. Make the max contribution to an IRA, even though it is non deductible. Then convert the IRA to Roth IRA. This opened up in 2010 and is available for 2011 as well. I think it will continue in 2012 but not 100% sure. This can be done with or without 401(k) contributions, the $5k is on top of $16k for 401(k).

Yes, I mentioned this in another thread. If you want a Roth, this is a good way to get one if you're exempt under the rules.

The "backdoor Roth IRA" contributions you are describing will not work in this case. Yes, you can do as you describe, but your conversion is prorated over *all* of your pretax IRAs - traditional, rollover, SIMPLE, SEP - not just the deductible portion you contributed.

"If you have any other (non-Roth) IRAs, the taxable portion of any conversion you make is prorated over all your IRAs; you cannot convert just the non-deductible amount.[2] In order to benefit from the backdoor, you must either convert your other IRAs as well (which may not be a good idea, as you are usually in a high tax bracket if you need to use the backdoor), or else transfer your deductible IRA contributions to an employer plan such as a 401(k) (which may cost you if the 401(k) has poor investment options). "

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

You cannot specify to convert just the nondeductible portion, even if it is in a different account. Your conversion will be party taxable (based upon the ratio of deductible/total IRA balance), and your traditional IRAs will now have a partial cost basis.

BogleRocks says

The "backdoor Roth IRA" contributions you are describing will not work in this case. Yes, you can do as you describe, but your conversion is prorated over *all* of your pretax IRAs - traditional, rollover, SIMPLE, SEP - not just the deductible portion you contributed.

Sure, but that doesn't mean it won't work. It just means it might cost you more money.

Also, the cost depends on when you do it. If you did this in March 2009 when lots of people's stocks were way down, you might not have paid nearly as much as you would have 6 months ago.

Well, I gave the simple answer that it 'will not work.' Technically, it 'works' in about the same sense that nondeductible contributions work, depending upon the size of your IRA portfolio. If your portfolio is $45,000 prior to implementing this action, you have shielded a mere 10% of your nondeductible contribution from taxes. Not worth it IMO, given the extra complexity you have now added (the need to keep track of a cost basis inside your IRA), not to mention the fact that you give up tax-loss harvesting opportunities and liquidity by shielding 10% rather than using taxable investing.

Not recommended, unless you can either convert your entire IRA balance to Roth, or place it in an active 401k/403b prior to doing so.

(sorry for second account, never had a password emailed to my first)

Well, I gave the simple answer that it 'will not work.' Technically, it 'works' in about the same sense that nondeductible contributions work, depending upon the size of your IRA portfolio. If your portfolio is $45,000 prior to implementing this action, you have shielded a mere 10% of your nondeductible contribution from taxes. Not worth it IMO, given the extra complexity you have now added (the need to keep track of a cost basis inside your IRA), not to mention the fact that you give up tax-loss harvesting opportunities and liquidity by shielding 10% rather than using taxable investing.

Not recommended, unless you can either convert your entire IRA balance to Roth, or place it in an active 401k/403b prior to doing so.

(Sorry for the second account, never had my password emailed to me)

BogleRocks 2 says

Not recommended, unless you can either convert your entire IRA balance to Roth, or place it in an active 401k/403b prior to doing so.

No, you're leaving something out here. If you make above a certain income, it used to be that you're not eligible to use Roth at all -- either because you couldn't contribute to a Roth IRA or you couldn't convert Traditional IRAs to Roth.

The point now is that everyone can convert to Roth. It may or may not be a good idea to do so, depending on the economics and a variety of other factors. But it might be a good idea to convert 100% of your accounts to Roth too. Again, depends on the individual situation.

You are saying a very specific thing won't work, but being vague by saying "it won't work." Something will work, just not the fact scenario that you proposed.

The scenario I proposed is the OP's scenario, which is why I addressed it. It's not just something I made up, it's extremely relevant to this discussion. Now, if he wants to convert his entire IRA balance to Roth, he can do it, but that's a big step involving loads of taxes (and is not something he asked about). It might be right for him, but that's a whole other enchilada.

I merely was addressing the (important) caveat to the suggestions offered to use the backdoor Roth idea. He should not use the idea unless he knows the ramifications, which were previously unmentioned.

BogleRocks 2 says

Now, if he wants to convert his entire IRA balance to Roth, he can do it, but that's a big step involving loads of taxes

Yes, I said that above -- it will always work, it just might cost you more in some cases.