Can I have both a SEP-IRA and a Solo 401k? (Self-Employed)

[FreelanceToFreedom]

i am self-employed. I already have a Roth IRA that I will continue to contribute to. This year I opened a SEP-IRA and made some contributions. However, due to tax planning changes (namely the new 199A deduction), I believe it makes more sense for me to do more ROTH contributions instead of pre-tax. Since the SEP IRA is pre-tax only, and a Solo 401k can be Roth (at least through some providers), I'm thinking about switching to a Roth Solo 401k.

Can I have both? Can I contribute to both in the same calendar year, or am I limited to one? Would it make more sense to try to convert the SEP into a Solo 401k? Would I need to close the SEP in order to open a Solo 401k?

[dandarc]

I think you can, but you need to get on that ASAP - a solo K must be set up by year end, and since the point of this exercise for you is to make employee-side contributions you need to be sure there is a written election in place or actually make your employee-side contributions before the end of the year as well.

[terran]

I believe I have read that you technically can, but that most SEP providers have written their plans such that you can't. Something about prototype and non-prototype plans. I seem to remember Schwab being and example of one that does allow it. Search for the topic on the bogleheads forum with responses by the user Spirit Rider as that's where I would have seen it.

Some solo 401(k)s would allow you to roll the SEP in, but unfortunately the two best IMO (Fidelity and Vanguard) either allow rollovers (Fidelity) or Roth (Vanguard), but not both.

[FreelanceToFreedom]

I think you can, but you need to get on that ASAP - a solo K must be set up by year end, and since the point of this exercise for you is to make employee-side contributions you need to be sure there is a written election in place or actually make your employee-side contributions before the end of the year as well.

Sorry I should have specified. I'm looking to switch to a Solo 401k for the 2019 tax year. Not worried about 2018 contributions.

[FreelanceToFreedom]

I believe I have read that you technically can, but that most SEP providers have written their plans such that you can't. Something about prototype and non-prototype plans. I seem to remember Schwab being and example of one that does allow it. Search for the topic on the bogleheads forum with responses by the user Spirit Rider as that's where I would have seen it.

Some solo 401(k)s would allow you to roll the SEP in, but unfortunately the two best IMO (Fidelity and Vanguard) either allow rollovers (Fidelity) or Roth (Vanguard), but not both.

Hmm okay, thanks. My SEP is at Fidelity, and I'd likely go with eTrade for a solo 401k as they seem to have the best options for Roth-compatible Solo K's.

Would that stipulation come into play if you're also switching providers?

[terran]

Here's an example of Spirit Rider's comments on the subject: https://www.bogleheads.org/forum/viewtopic.php?t=220100#p3390044

Personally I would go with Vanguard if I wanted a Roth solo 401(k). You may have seen comments about them not being as good because they only allow investor class mutual funds, but they've closed or are closing all investor class funds, so now admiral class funds are available in their 401(k).

[bacchi]

Transfer the SEP to a tIRA.

Start contributing everything to the 401k. Vanguard has both a Roth and pre-tax option for the same account.

[DavidAnnArbor]

I asked an IRS agent once and he said that you can keep your SEP plan that you are no longer contributing too, and still start a solo 401k plan that is now what you will be contributing too.
So I have a SEP IRA with VAnguard that just sits there, and I have a solo 401k with Fidelity that I am actively contributing to.

[FreelanceToFreedom]

I asked an IRS agent once and he said that you can keep your SEP plan that you are no longer contributing too, and still start a solo 401k plan that is now what you will be contributing too.
So I have a SEP IRA with VAnguard that just sits there, and I have a solo 401k with Fidelity that I am actively contributing to.

Interesting, thanks. That's an appealing option. I tried to call and ask the IRS but the appropriate department apparently is only reachable during tax season.

Do you know if you could start contributing to the SEP again in future, as long as you only contribute to one per calendar year? Would be nice to have that flexibility if circumstances change.

[terran]

I asked an IRS agent once and he said that you can keep your SEP plan that you are no longer contributing too, and still start a solo 401k plan that is now what you will be contributing too.
So I have a SEP IRA with VAnguard that just sits there, and I have a solo 401k with Fidelity that I am actively contributing to.

Interesting, thanks. That's an appealing option. I tried to call and ask the IRS but the appropriate department apparently is only reachable during tax season.

Do you know if you could start contributing to the SEP again in future, as long as you only contribute to one per calendar year? Would be nice to have that flexibility if circumstances change.

Please do look at the bogleheads link I posted. Spirit Rider on that forum has proven him/herself to be extremely knowledgeable about retirement plans and I would only take advice that contradicted his/hers that included direct citations of IRS rules or tax law that I was confident I could understand. According to him/her Vanguard SEP IRAs cannot remain open for a business that also has a solo 401(k) and remain valid plans.

[bacchi]

It's unclear what you would gain with an SEP that a solo 401k doesn't provide. Is it futures that certain brokers like IB allow in an SEP?

My Vanguard s401k has both a pre-tax and a Roth account. When I contribute, I can choose which I want to use. They're both active and the $18.5k can be split between them however I want.

[Laserjet3051]

You can have a solo401k and SEP in the same year. You cannot CONTRIBUTE to both in the same year. Thus you can hold onto your SEP into 2019 and contribute to the solo 401k in 2019 as long as you dont contribute to the SEP in 2019. At VG you CAN contribute to the SEP in 2019 so long as you code the contribution as personal (individual) and NOT as employer.  Or as others have suggested, you could roll your SEP-IRA into a tIRA.

An advantage of keeping the SEP is that at some point in the future, I believe you can switch back to making SEP contributions in a year in which no solo 401k contributions are made.

SEP IRAs have the advantage over solo401ks (at VG) in that you can buy ETFs, which are unavailable in the  latter. I have both a solo401k and SEP-IRA at VG.

[DavidAnnArbor]

I agree you should ask Spirit Rider's opinion on Bogleheads.

It's not a good idea to switch repeatedly back and forth between SEP contributions one year, followed by solo 401k contributions for the following tax year.
I believe solo 401k plans are meant to be held for a number of years.  But I'm not entirely sure about this.