Roth Conversion Frequency

[Guest Vicky M]

I am self employed with a SEP-IRA. From what I have read, it seems that I can convert the IRA to a Roth by December 31st; pay the taxes on the converted funds, yet also take an income deduction for the SEP-IRA contributions made throughout the year. Am I undertanding this correctly? Also, how often can I convert IRA funds to Roth funds? Can this be done every year?

[John G]

Frequency of conversions: There do not appear to be any limits on the number of conversions you can make, although administrative burden would suggest that if not a single Roth conversion then at least major blocks of assets. Some folks convert a modest amount each year to avoid tax bracket creep. Some conversions are associated with dips in the stock market or when corporate retirement assets can be rolled into a Roth. Sometimes multiple conversions are due to requests for Roth conversions from different accounts.

However, a multiple conversion approach means you must income qualify each year you convert.

Self employed, or persons that own a company have some different retirement plan options than those who are employed by others. You may want to take your accountant to lunch and discuss your options. Self employed persons ussually have greater flexibility in shifting income and expenses to enable them to qualify for a Roth conversion.

[This message has been edited by John G (edited 06-05-2000).]