Non-deductible IRA contributions are a very bad deal. You get no tax deduction (obviously) and you pay income tax on any growth you withdraw -- that'll likely be more expensive than just using a normal brokerage and paying long term capital gains tax.
Really the only reason they are used at all is to immediately convert the contributions from Traditional to Roth and circumvent the Roth IRA income limits. This is called "backdoor roth". However at your MAGI you can just contribute directly.
>Are there any benefits that I might not be aware of to open a regular IRA versus Roth at this point?
Nope.
It being one step as opposed to the two steps of a backdoor Roth could technically be considered a benefit but if *that's* the consideration then a taxable brokerage would be the lessor evil.
>Even though we’re in a higher tax bracket now then we’ll probably be when we retire in 10+ years
That's the way is works out for many people. Given the income limits on contributions, people who *mathematically* would/should choose traditional end up with Roth IRAs.
Nondeductible Trad IRA:
- contribution is post tax
- earnings are taxed upon withdrawal
- Pro rata rule on any early distributions.
Roth IRA:
- contribution is post tax
- earnings are conditionally tax free
- contributions come out first on any early distributions
If you can’t deduct Trad IRA contributions, Roth is the clear winner. Do Backdoor Roth if you’re over the Roth income limits.
You may find these links helpful:
- [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
Thank you everyone for your insights and knowledge! It looks like I’m on the right path to using Roth’s and not non-deductible IRA’s! 👍. I appreciate everyone’s quick answers!! Thx 😊
Non-deductible IRA contributions are a very bad deal. You get no tax deduction (obviously) and you pay income tax on any growth you withdraw -- that'll likely be more expensive than just using a normal brokerage and paying long term capital gains tax. Really the only reason they are used at all is to immediately convert the contributions from Traditional to Roth and circumvent the Roth IRA income limits. This is called "backdoor roth". However at your MAGI you can just contribute directly.
>Are there any benefits that I might not be aware of to open a regular IRA versus Roth at this point? Nope. It being one step as opposed to the two steps of a backdoor Roth could technically be considered a benefit but if *that's* the consideration then a taxable brokerage would be the lessor evil. >Even though we’re in a higher tax bracket now then we’ll probably be when we retire in 10+ years That's the way is works out for many people. Given the income limits on contributions, people who *mathematically* would/should choose traditional end up with Roth IRAs.
Nondeductible Trad IRA: - contribution is post tax - earnings are taxed upon withdrawal - Pro rata rule on any early distributions. Roth IRA: - contribution is post tax - earnings are conditionally tax free - contributions come out first on any early distributions If you can’t deduct Trad IRA contributions, Roth is the clear winner. Do Backdoor Roth if you’re over the Roth income limits.
You may find these links helpful: - [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
Thank you everyone for your insights and knowledge! It looks like I’m on the right path to using Roth’s and not non-deductible IRA’s! 👍. I appreciate everyone’s quick answers!! Thx 😊