SEPP and Roth IRA

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L1: SEPP and Roth IRASomebody has probably already asked this question but I can’t find it in the search function. Is there any restriction on opening a Roth IRA while taking SEPP distributions?
Mike2005-10-29 07:16, By: daddy0, IP: [69.120.56.189]

L2: SEPP and Roth IRAThere is no connection between the two types of account, as long as you aren’t asking about making a transfer/distribution from the SEPP 72-T IRA accounts into a ROTH IRA. That would “bust” the SEPP 72-T plan because you would have increased your withdrawals above your limit. However, if you had other TRADITIONAL IRA accounts that are not part of the SEPP 72-T plan, then you could transfer from those other IRA accounts to a new or existing ROTH IRA, or make new contributions to a ROTH IRA not as a transfer. However, there are annual income restrictions that you have to check to make sure you are eligible.
BUT, WHY WOULD YOU WANT TO DO THIS ? IF YOU CAN AFFORD TO MAKE THE CONTRIBUTION OR TRANSFER (WHICH IS TAXABLE), THEN WHY ARE YOU USING A SEPP 72-T ? Or did you start the plan, and then get a job, but are stuck with taking the withdrawals ? If so, consider making tax deductible IRA contributions, if eligible, to offset the taxable SEPP 72-T withdrawals.
Speak with a qualified financial and/or tax advisor or CPA.2005-10-29 16:38, By: dlztaxes, IP: [4.175.9.245]

L2: SEPP and Roth IRAI started taking distributions seven years ago. Now with two kids in college I’m trying to remove assets that would hurt me in qualifing for financial aid.
Mike2005-10-30 06:03, By: daddy0, IP: [69.120.56.189]

L2: SEPP and Roth IRAI don’t think you are doing the right thing re Financial Aid. First, parental assets only count at about 5%. Second, I don’t think most formulas include retirement accounts because of the penalties if you had to use them. Third, even if they did, then there would be no difference between retirement and non-retirement assets. And fourth, if they were counted differently, then by your taking money out of retirement accounts (which I believe aren’t counted), you would be increasing your applicable assets and decreasing your financial aid — the excat opposite of what you are intending to do.2005-10-31 13:42, By: dlztaxes, IP: [4.175.9.180]

L2: SEPP and Roth IRATaking SEPP / 72(t) distributions neither disqualifies younor qualifies you for a Roth or Traditional IRA. SEPP distributions simply become “ordinary income” and is taxed appropriately, but it is not “earned income” which you need to qualify for IRA contributions. So for your FAFSA Form (I sure am glad those days are passed for me), your SEPP distributions will count as part of your “Income” component.
In order to fund either a Roth or Traditional IRA for any year, you need to have “earned income” either from an employer or be self-employed. Check out IRS Pub 590 for other restrictions like minimum and maximum income along with filing status. Also, remember that you have a maximum limit to put into both a Roth and Traditional IRA. For 2005 this limit is $4,000.You can put all into either IRA, or split between the two, but you can’t put $4,000 into each. Pub 590 will spell this out for you.
Jim2005-10-31 14:20, By: Jim, IP: [70.184.1.35]