Can I have both an SEP IRA and a Roth IRA?

[readytorock]

I'm self-employed, so I'm in charge of my own retirement. I currently have a Roth IRA. I know and love the benefits of tax-free growth. But the annual contribution of $5k is pretty low.

So I started looking into my options and found out about SEP IRAs. They operate more like a 401k in that contributions are tax deductible and growth is tax deferred. But the contribution limits are $49k.

So my question is, if I max out my Roth each year, am I allowed to then contribute to an SEP?

[MonkeyMama]

Yes, you can.

Main difference is you can put 100% income into ROTHs and only 25% of income into SEPs.

You can do both a SEP and another type of IRA. Just as you can do a 401k and a ROTH.

[simpletron]

If you don't have any employees, I would look into a solo 401K(individual 401K is another name). this give you the same 49K limit(54.5K if over 50), but you can make both roth and deductible contributions. also you can roll over your roth IRA into the 401K, allowing you to manage everything from one account.

the 49K limit for solo 401K and SEP-IRA is the absolute max, but there is also a max based on your income that might be lower. for a solo 401K, you can contribute the normal 401K limit(16.5K or 22K(over 50)) + up to 25% of compensation as a profit sharing as long as both combine don't exceed 49K or 54.5K(over 50). whereas for a SEP-IRA, you can contribute up to 25% of compensation as long as it doesn't exceed 49K.(read as advantage for solo 401K)

the only downsides(that I can think) for the solo 401K is the additional paperwork and the possiblity of a different fee structure that might favor the SEP.

[readytorock]

Thanks for the answers, I will look into the Solo/Individual 401k.

[MonkeyMama]

I wouldn't do the solo 401k.

SEPs are so easy to set up.

I know people who find real cheap places to get their paperwork done for solo 401ks, but I am really wary if those are really done right. There are tax filings, etc.

Depending on your circumstances, I'd probably go with the ROTH, and then the SEP. If you feel like you still want to contribute more than you are able to, then I'd look into the solo 401k option.