Author Topic: SEP-IRA vs. Taxable  (Read 2244 times)


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SEP-IRA vs. Taxable
« on: August 10, 2013, 10:00:27 PM »
This question is premised on US, New York, and Canadian tax law:

I am considering whether to open and fund a SEP-IRA this year on top of maxing out my Roth IRA, and was looking for some advice.

I'm self employed (1099) doing contract paralegal work for a patent agent (probably should be a W-2 but I'd be the only employee and it's a giant hassle)

Right now my positions are as follows:

~$12,000 in a Roth IRA (100% equities in a few broad index funds)  I currently have automatic withdrawals set up from my checking account on days I get paid which will max my Roth contribution for the year.
~$2,500 in a taxable account (50% equities, 50% bonds)
~$12,200 in a savings account making 0.84% interest (emergency fund)
~$1,000 in checking
~$2,500 in what I call my slush fund.  My income can vary by a lot in any given month, so I keep a set-aside account to prevent me having to dip anywhere else.  When it gets above $3000 I skim it to my taxable investment account.

By the end of the year, I am expecting to have another $4,000 or so able to be contributed to the taxable account under the current plan, on top of my automatic contributions to finish maxing out my Roth.

The reason I currently have it in a taxable account is that I'm thinking I'll want to buy a house in the next 5-7 years, and therefore want the money available for that.  But it's also gnawing at me a bit not to be maximizing my tax advantage.  The $6500 should be well under my SEP allowance for 2013, so I can do this if I want to.  But I'm unsure.

The other factors to consider are:

My boyfriend lives in Canada and there's a not-too-small chance I'll move there in the next few years.  So I don't know how various retirement accounts will be impacted by that.

I live in New York State, which has high income taxes.  I am in the 25% bracket federally, and 6.45% state.  If I applied the full tax reduction from the SEP contribution to making a bigger SEP contribution, I could probably get it to $9000.  Which would be very nice.

Edit to add: I might not get the full effect of the SEP there, because at some point the contribution bumps my marginal rate down to 15% federally.
« Last Edit: August 10, 2013, 10:10:34 PM by huadpe »


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