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Learning, Sharing, and Teaching => Investor Alley => Topic started by: SpaceGhost on July 28, 2016, 05:53:20 PM

Title: SEP IRA to tIRA
Post by: SpaceGhost on July 28, 2016, 05:53:20 PM
I have a question about a potential move from my SEP to tIRA and hope you guys can provide some sound feedback.

All my accounts are with Vanguard.  I have an SEP IRA, Roth, and just opened an i401K.  my SEP is fully funded for 2015 and upon opening the i401K, i intend to fully fund it for 2016 throughout the balance of the year.  The amount in the SEP is just below the $50K minimum to conver the account to admiral shares.  If my understanding is correct, I cannot continue to fund my SEP for 2016 AND begin to fund my i401K for the same year.  Vanguard suggested converting my SEP to an tIRA before the end of the year which would allow me to fund both the tIRA and the i401K for 2016.  This would allow the tIRA to get above the $50K minimum for admiral shares (savings on expense ratio).

I'm still relatively new to all the different types of accounts and how/when they can be funded, so I am interested to hear your feedback on if I am thinking about this correctly.

Thanks in advance
Title: Re: SEP IRA to tIRA
Post by: terran on July 28, 2016, 09:40:17 PM
Sounds right to me. Make sure you fill out the solo 401k forms such that the effective date of the plan is January 1, 2016 so you can base the contribution on all of this year's earnings. You might also consider opening it at Fidelity instead of vanguard because they allow incoming rollovers, so you could move your SEP funds into the 401k -- this would allow you to do a backdoor roth if your income ever becomes high enough to make that necessary.
Title: Re: SEP IRA to tIRA
Post by: SpaceGhost on July 29, 2016, 05:47:13 PM
Interesting.  Setting the date to January 1 sounds completely logical...wish I had known that beforehand.  The i401K was set up last week with start date of August 1.  I wonder if I can call Vanguard and change the date since no contributions have been made just yet?  I'll try that and see.

Thanks for youe feedback
Title: Re: SEP IRA to tIRA
Post by: DavidAnnArbor on July 29, 2016, 09:39:36 PM
I prefer the Solo 401(k) with Fidelity because you can get the Advantage class Spartan Total stock market index fund at the .05% expense ratio, whereas with Vanguard the Admiral class index funds were not available in the Solo 401(k)
Title: Re: SEP IRA to tIRA
Post by: SpaceGhost on August 01, 2016, 10:56:14 AM
For record, I wanted to follow up here for benefit of others on my conversation with Vanguard regarding the above.

First, Vanguard noted that despite me setting start date of i401K at August 1, it can still be funded to the max just as if date was set January 1.
Second, they noted that there is no need to convert my SEP IRA to a tIRA.  The SEP functions as a tIRA.  I can fund the SEP IRA as a tIRA from the Employee side and fund the i401K (from Employee and Employer side) in the same calendar year without any issues.