IRA, 403B, SEP question

I have always maxed out my work 403B, and have a high salary. Years ago, I opened an IRA for myself and my wife who does not work. I would do a back Roth conversion for both of us. Later I had some consulting income and opened a SEP into which I could contribute for some tax deferment on the consulting income each year, when that started, I stopped contributing to the IRA and doing the backdoor Roth for myself, but still do hers each year.

so what I have:

  • yearly 403B max
  • SEP with a contibution of 3-6K/year for consulting income.
  • yearly wife IRA with Roth conversion (she has no other retirement account)
  • Roth IRA for me with no contributions for many years, small $$
  • empty IRA for me that I used to use for a backdoor each year.

Should/can I be contributing to my IRA? This would be nondeductible (I think?) and so I did not do this but this may have been a mistake. How is this affected by my yearly SEP contribution?

Hi @gatorswamp,

The income limit on contributions to a traditional IRA pertain to the deduction allowed for the contribution.

Unless recent changes were made, there is no income limitation for non-deductible contributions.

They are still limited by the overall contribution limits based upon your age.

Does that help you?

All holdings and some statistics on my Fool profile page (Click Expand)

Well, it’s good that you stopped doing backdoor conversions for yourself at that point, because once you opened the SEP IRA, you would have been subject to the pro-rata rule on your conversions.

Well, with SEP contributions of only $3k - $6k/year, it seems as though you might have been better off continuing your backdoor IRA strategy, rather than doing SEP contributions, since you would have been able to put more into the IRA in most, if not all, years.

As long as you have compensation, you can always make contributions to an IRA.

Yes, any year in which you were over the income limit to make direct contributions to a Roth IRA, any contributions to a Traditional IRA would have been non-deductible, since you were considered to be covered by other retirement plans - both the 403(b) and your SEP IRA.

Yearly SEP IRA contributions do not directly affect your ability to make a non-deductible Traditional IRA contributions. However, having a balance in a SEP IRA does make the backdoor Roth strategy more expensive because of the pro-rata rule.

I will suggest to you that there is a way to change this:

Rather than continuing to make SEP IRA contributions, I would suggest opening a solo 401(k) and rolling the SEP IRA into that solo 401(k). Then, you would have no money in a Traditional IRA, which will allow you to do a backdoor Roth contribution for yourself without running into the pro-rata rule. Additionally, I will point out that due to allowing catch-up contributions the solo 401(k) has (or at least will have once you reach age 50) higher contribution limits than the SEP IRA, and the solo 401(k) allows you to make Roth contributions if you wish to do so, while a SEP IRA only allows pre-tax contributions.



Unless recent changes were made, there is no income limitation for non-deductible contributions to a Traditional IRA.

There, fixed that for you. Roth IRA contributions are also ‘non-deductible’ since they are after tax contributions, and there are income limits on making direct Roth contributions.



what is curious is that back then I had a CPA doing my taxes and he got me doing the Roth backdoor, and later the SEP contribution. My taxes are really not that complicated (other than this part I guess) and so I use Turbotax now and haven’t altered what I was doing with him 7-8 years ago.

I wonder why had had me open a SEP and not Solo 401 (K)? It appears the Solo 401(k) contributions are not limited to 25% of my consulting income either, unless it is less than $20,500 (it will be more)?

So the action items would be:

  • open Solo 401 (k) for 2023
  • start making Solo 401 (k) contributions up to limit of $22,500 (I turned 50 during this year so can go to $30,000 I guess?)
  • make the 2022 SEP contribution, and then roll into the Solo 401 (k).
  • End of year do both my and spouse Roth Backdoor via IRA contributions ($6,500 for spouse and $7,500 for me).

Does that make sense?

There is such a thing as too much money in tax sheltered accounts. Be aware of the advantage of pretax stock holdings which are taxed lightly relative to iras, and have the advantage of not being subject to rmd withdrawals. Balance is key.


1 Like

Sorry, not so simple. Your $22,500 ($30,000 if 50 or older) employee deferral limit will need to be split between your 403(b) and 401(k) plans. That’s the total that is allowed per employee across plans in 2023. Considerations on how to split the contributions should probably include matching offered in the 403(b) and investment options/expenses for each plan.

That said, if you can find a solo 401(k) provider that allows you to make after-tax contributions, you can put up to $66,000 into your 401(k). Here’s an article that describes solo 401(k) contribution limits and how to use the after-tax contributions to your advantage Understanding The Solo 401(k) Plan Contribution Rules ( although the contribution limits are for 2020.

A solo 401(k) that offers after-tax contributions also provides the opportunity to do a mega-backdoor Roth strategy, where you immediately convert the after-tax contributions into a Roth account.

Yes, roll the entire SEP IRA into the solo 401(k) before Dec 31, 2023 - your SEP IRA balance on Dec 31, 2023 needs to be $0, or you will trigger the pro-rata rule if you do a conversion for yourself in 2023.

Contributions for 2023 can be made as late as April 15, 2024. That said, the conversion event is based on the calendar year that it is done, not the year that the contribution was for. So if you waited until 2024 to do the conversion, you would need to be sure your SEP IRA balance will be $0 on Dec 31, 2024 to avoid the pro-rata rule.



It depends on the type of tax shelter. Yes, having too much in Traditional (pre-tax) accounts can trigger high taxes when RMDs begin. That said, @gatorswamp’s RMD age will be at least 75 under current law, so there will be time to balance later, if needed. On the other hand, putting after-tax money into a Roth account, rather than a taxable brokerage account, will be more advantageous in the long run.

While Roth 401(k)s are subject to RMDs, they can be rolled over into a Roth IRA, which is not subject to RMDs, before hitting RMD age. And qualified Roth distributions are not taxed, which is an even lighter tax than taxable brokerage assets.

Yes, there is a place for all 3 types of accounts - taxable brokerage, pre-tax/Traditional plans and Roth plans. Those who try to move all of their pre-tax/Traditional assets into Roth plans are pre-paying taxes that they may have been able to avoid in later years because of things like QCDs and Schedule A medical deductions if they (or their spouse if married) need long term care. Plus, spending down pre-tax/Traditional accounts before taking SS can use the standard deduction and lower tax brackets to pay lower taxes before RMDs hit. A big part of retirement planning is not only asset allocation but also considering asset location.