DW and I make too much to fund a Roth, and we are both covered by 401k's at work so no deductible IRAs are allowed either. I thought I could fund non-deductible IRAs and then convert to Roths since the income limit changed in 2010.
However, I just learned that even if you only convert post-tax dollars, your conversion gets taxed pro-rata across all of your IRAs including the pre-tax ones. Since I have a rollover IRA from a previous 401k plan, I'd be accelerating the tax on a portion of that.
At this point I'm not even sure there's a point to funding non-deductible IRAs, since my only plan for them was to convert to Roths. I guess I should still do it now, and bring up the tax on the rollover plan later when we are in a lower tax bracket.
You really have to love how the gov't discourages people from saving.
http://www.investmentnews.com/article/20100131/REG/301319991
However, I just learned that even if you only convert post-tax dollars, your conversion gets taxed pro-rata across all of your IRAs including the pre-tax ones. Since I have a rollover IRA from a previous 401k plan, I'd be accelerating the tax on a portion of that.
At this point I'm not even sure there's a point to funding non-deductible IRAs, since my only plan for them was to convert to Roths. I guess I should still do it now, and bring up the tax on the rollover plan later when we are in a lower tax bracket.
You really have to love how the gov't discourages people from saving.
http://www.investmentnews.com/article/20100131/REG/301319991