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Quick Tax Question -- SEP Without Deduction Benefit
01-23-2007, 06:03 PM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Posts: 12,880
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Quick Tax Question -- SEP Without Deduction Benefit
Last year was the last year that I had earned income, and I can contribute about $1500 to my SEP-IRA for 2006. However, my tax will be so low, that the contribution will have no effect on my tax.
So, the question is: do I contribute anyway? I'd get the benefit of tax-free compounding. I have enough dough that I can make it to 59.5 without withdrawals. I don't care about RMD's. My tax rate will be pretty low for a while.
I'd like to decide before tomorrow morning.
Thanks,
__________________
Al
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Re: Quick Tax Question -- SEP Without Deduction Benefit
01-23-2007, 06:28 PM
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#2
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Moderator Emeritus
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
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Re: Quick Tax Question -- SEP Without Deduction Benefit
Do you do a Roth contribution?
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No more lawyer stuff, no more political stuff, so no more CYA
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Re: Quick Tax Question -- SEP Without Deduction Benefit
01-24-2007, 08:23 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Posts: 12,880
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Re: Quick Tax Question -- SEP Without Deduction Benefit
Yes, Roth is maxed out. I'll be converting lots of the SEP-IRA money to Roths in the future, but there's plenty there for conversion.
__________________
Al
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Re: Quick Tax Question -- SEP Without Deduction Benefit
01-24-2007, 08:26 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Posts: 12,880
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Re: Quick Tax Question -- SEP Without Deduction Benefit
I guess the basic thing is this: I will get tax-free compounding, but for at least 7 of those years (between now and age 59.5), my tax rate will be low. I'll be withdrawing it when my tax rate is higher. So, it's probably not worth it.
__________________
Al
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Re: Quick Tax Question -- SEP Without Deduction Benefit
01-24-2007, 08:31 AM
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#5
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Moderator Emeritus
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
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Re: Quick Tax Question -- SEP Without Deduction Benefit
Yeah, I'd skip it. Or do it and then convert it to a Roth next year when you don't have earned income.
__________________
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No more lawyer stuff, no more political stuff, so no more CYA
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Re: Quick Tax Question -- SEP Without Deduction Benefit
01-24-2007, 01:43 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Posts: 12,880
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Re: Quick Tax Question -- SEP Without Deduction Benefit
Yes, I decided to skip it. Thanks. I already have lots of money available for converting to Roth.
__________________
Al
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