Roth-eligible with generous SEP? Also does 529 make sense?

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I am 44, married, making under the ~$200,000 threshold for Roth IRA contributions.

Recently retired from the US military, with TSP, including some Roth once that option became available, but mostly traditional; no longer can contribute to that account.

I have a SEP IRA that is employer-funded at a very high rate of 20% of my salary annually; it is a traditional IRA. Wife is not covered by a retirement plan and does not work currently (we are having a baby soon, wife is about the same age as me).

Two questions:

  1. Are we even eligible for a Roth since the SEP IRA gets well over the maximum contributions from my employer? (None of it is employee-funded)

  2. Does a 529 make any sense, as we will both be over 59.5 years old before our baby will be college-age (even if she turns out to be Doogie Howser)? Or would it make more sense to just use traditional IRA funds to make them essentially “tax-never” (for the portion that will pay for her college), and not have to deal with all the limits and restrictions on 529s?

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  1. My understanding is that an individual can both receive employer contributions to a SEP-IRA and make contributions to a traditional or Roth IRA. Also, spouses who don’t work can contribute to a spousal IRA, either a traditional or Roth IRA, if they file taxes jointly with a spouse who does.
  2. A new benefit of 529 plans is that some of a 529 plan can be used to fund the child’s Roth IRA. Beneficiaries are allowed a lifetime maximum of $35,000 for rollovers from a 529 plan to a Roth IRA. Many states offer tax deduction for contributions to 529 plans.
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The SEP IRA is an employer plan. It does not impact your right to contribute to your Roth or Traditional IRA.

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Learn more from the IRS: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps#:~:text=A%20SEP-IRA%20is%20a,a%20traditional%20or%20Roth%20IRA.

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Thank you! I was getting confused by this being called an IRA (SEP IRA) plus the limit on contributions to any IRA of $6,500 or $7,000. Appreciate the help!

Would it make the most sense to pay for our child’s college by just putting extra in our retirement? It seems to be more tax-advantaged that way (and have military retirement plus a significant chunk in retirement funds by that time so it won’t really cut into our lifestyle in retirement). Employer will be putting in $20k/yr pre-tax in a non-Roth SEP for about 18 years before she starts college, wife and I will both be over 59.5 years old when she starts, and school expenses are tax deductible, so that seems to make more sense to fund from the SEP withdrawals than just the state tax benefit of a 529.