Arie Korving, CFP
Korving & Party LLC, Suffolk, VA
There are two issues to consider. If you roll a SEP IRA into a traditional IRA, assuming you do it right, there are no taxes to pay and your small change will continue to grow tax-deferred until you begin taking withdrawals.
If you decide to roll it into a Roth IRA, you make owe income tax on the amount rolled over. However, the money will then grow tax-exempt, as there will be no strains to pay when you begin taking withdrawals.
Be sure to know ahead of time how much you will have to pay in taxes. Also, try to keep off using some of the rollover money to pay the tax, because, depending on your age, it could trigger an early withdrawal penalty.
It’s up to you to settle on which option works best. If you are unsure, you may want to consult a financial planner.