How to Convert a SEP IRA to a Roth IRA
In the old days, moving your retirement plans and accounts from one place to another was usually a major undertaking, requiring at least two sets of paperwork and several weeks of waiting. But new tax laws have made it easier than ever to convert your Simplified Employee Pension (SEP), Salary Reduction SEP (SARSEP) or Savings Incentive Match Program for Employees (SIMPLE) IRA into a Roth IRA. Only a few steps are now required to accomplish this.
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Instructions
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Open a new Roth IRA account, either with your existing custodian or a new one. You may need to mark the method of funding as an incoming transfer or rollover. Provide the necessary information and complete the application and submit it. Wait until your account is open.
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Request a transfer for your (SEP) or other retirement account. This is always the first step in any Roth conversion process. You will either be sent a transfer form by your custodian or will more likely be directed to a website that has downloadable forms.
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3
On the transfer form, you will need to check off "Rollover" box to make this choice clear. You will also need to specify the type of account you are rolling your plan into. Mark "Roth IRA" as the account of destination. You will need to put your Roth IRA account number and new custodian information, if necessary, in the recipient section.
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Complete the rest of the application and mark whether you want your plan assets transferred "in kind" or liquidated and sent as cash.
You will not have to roll your SEP or other plan over into a traditional rollover IRA account first before transferring it onto a Roth account. Recent tax law has eliminated this requirement. -
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Wait for your plan to be transferred into the Roth account. Make sure your SEP or other account is totally empty and doesn't have any residual income sweep in after the transfer. Remember that you can transfer your plan to a self-directed Roth 401(k) or similar account if your circumstances permit it as well.
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