Why the NEW Roth SEP IRA is NOT a GAME CHANGER in 2024

In this video, I delve into the newly introduced Roth SEP IRA in 2023 and compare it with other retirement plans like the solo 401K. If you're considering the Roth SEP IRA, you'll want to understand the limitations, potential tax consequences, and why it might not be the best option for you. Join me as I break down the complexities and offer insights that could save you time and money in planning your retirement. Feel free to drop your questions in the comments below, and don't forget to subscribe for more financial guidance!
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[@robertsharpe9587]

I am self employed, have no employees. I currently have a SEP IRA and a traditional IRA. The latter has a fairly substantial amount of nondeductible tax contributions. I am planning on setting up a solo 401K and doing a. reverse rollover with my SEP IRA to get around the pro rata rule and then converting my traditional IRA to a SEP Roth. Does this make sense?

[@genelevesque2555]

I am a sole proprietor that does real estate and fix and flips. I am 57 years old and last year I converted my traditional IRA to a Roth. Paid the taxes and I am all good now. I currently only have $90K in the Roth. My goal is to get as much money into my Roth as quickly as possible. Because I recently found out that I can set up a self directed Roth IRA and invest in real estate. My goal is to do 3 to 4 fix and flips a year through my self directed Roth with a LLC. So 2 questions for you: 1. What is the best way for me to get the most money in over the next 5 years? (I'm going to need at least $500K in the Roth in order to do the fix and flips with that IRA) 2. Is it true that after 59 1/2 and after having the Roth for at least 5 years, then I can take out distributions whenever I want and any amount I want for the rest of my life tax free? Thanks so much, your information is nothing short of amazing!

[@j10001]

1. Max out your direct Roth contribution annually ($7500). And put as much as possible into a 401k (look into Solo 401k if you don’t have an employer plan). 2. Yes, that’s true. 3. Note that if you do real estate investment through your Roth, you cannot do any work on the property. You can do the desk work of managing it, but cannot do sweat equity. You have to hire that out using Roth money.

[@dudewheresmyguitar21]

I dont even know where to contribute to a Roth-Sep IRA, vanguard doesnt offer it

[@EJZ8]

Does anyone know where I can open a Roth Sep IRA?

[@vanillaiceicebaby22]

Probably schwab, vanguard, fidelity etc any of the big companies.

[@TravisSickle]

Not sure, I haven't looked around since last I checked.

[@j10001]

I feel like you could have made this better with a scenario drawn out in advance instead of thinking it up as you went along

[@TravisSickle]

thanks for feedback. Sometimes I do sometimes I don't.

[@WeBeatMedicare6969]

While the IRS is allowing this, no financial broker appears to be offering them..what’s the point?? (edit: hey, that was my question from the other day you just covered in the video…appreciate it)…keep up the good work

[@TravisSickle]

August 11, 2023

[@stacysays]

As a sole proprietor, I want to contribute to a Roth SEP. I'm going to assume that that is not allowable as a tax deduction since it's a ROTH. Correct? Or are all SEP contributions deductible to the employer? FYI: My business is not making enough for a.Solo 401 k yet . So SEP Is the only option at this point. 😊

[@KimPetitclerc]

How will the Roth SEP IRA work with your employees? Will you now need to pay payroll taxes on the contributions? Will you now tag their W-2s? All boxes, just as if it was a 401(k) Roth contribution?

[@greghanger832]

Roth SEP vs SEP is far superior for a Sole Owned S Corporation owner. Why? The owner would be able to deduct a 20% qualified income deduction for the net income resulting from the forgone SEP deduction when using a Roth SEP. For a younger business owner, the advantage only compounds overtime. For example, 100K could generate a 25K SEP deduction, however with the ROTH an additional 5K (25k x 20% QBI) is picked up meaning I have essentially achieved a deduction for my ROTH decision. Better still the income in excess of wages is still not subject to SE tax. Once this option is available, I would recommend all S corporation owners with SEP consider a switch.

[@TravisSickle]

That’s not the best plan. You can get $66k into the solo 401k earning that same $100k Much better plan.

[@greghanger832]

@@TravisSickle It is an option, but in the real world business owners need to consider using the salary they pay to support current life. Also, there is an additional compliance cost as soon as the account reaches 250K for a 5500 filing. I have had few actual clients bite off at the idea of using the majority of the money the business makes for pension savings. For a select few the 66K option is the correct choice. I think the real-world answer for most will be SEP. Easy, flexible, and a comfortable amount of deferred cash to retirement.

[@NATEG01]

@@greghanger832 I'm a tax accountant and if this is how the Roth SEP will work, I would completely agree with you. The problem though, is that financial institutions haven't started offering it yet since they are still waiting on clarification from the IRS. But if an S-Corp is truly able to deduct Roth contributions to a SEP, this is a no brainer. You would be getting a double tax benefit with your S-Corp being able to deduct the contributions, with the distributions tax-free when you retire. But sounds too good to be true so we will have to wait and see what the IRS says.

[@NATEG01]

@@TravisSickle The problem though with a Solo 401k as an S-Corp owner, is that the employee portion of the contribution has to be made through payroll deduction, so you are essentially paying FICA tax of 15.3% on the employee portion of the contribution. If you are only in the 12% bracket, you would be paying more in taxes. The Solo 401k only makes sense if you are in a higher tax bracket and are able to contribute more than 25% of your income.