Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Non-Deductible Traditional IRA vs. Taxable Account?
Old 12-27-2013, 12:23 PM   #1
Confused about dryer sheets
Join Date: Dec 2013
Posts: 1
Non-Deductible Traditional IRA vs. Taxable Account?

Currently my income is too high to take the deduction for a Traditional IRA. It is also too high to contribute to a Roth IRA.

For the past few years, I have been making non-deductible contributions to my traditional IRA. I am wondering if this is the best use of my money? Or is contributing to a taxable account a better idea?

The investments in this account are all low cost, passive funds that mimic the S&P500 or some other index. I will make maybe 1 or 2 trades every 5 years to account for re-balancing. I'm 32 years old and expect to have 30 years to retirement.

Side note:
I understand the mechanics of a back door Roth IRA and its advantages. I do intend to take advantage of this rule, but for the moment, I'd like to get an opinion on the non-deductible traditional IRA vs. a taxable account.

nacho is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-27-2013, 12:33 PM   #2
Full time employment: Posting here.
Join Date: May 2011
Location: Marco island
Posts: 813
I'd contribute and do the back door Roth.

Gatordoc50 is offline   Reply With Quote
Old 12-27-2013, 12:40 PM   #3
Full time employment: Posting here.
Join Date: May 2011
Location: Marco island
Posts: 813
Note: you will have to convert other non- Roth IRAs also. It may mean a tax hit if you have high gains in the existing IRA.
Gatordoc50 is offline   Reply With Quote
Old 12-27-2013, 01:40 PM   #4
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 3,877
With the tIRA you have a bunch of withdrawal restrictions and pay regular income tax rates on your gains. With the taxable account you have easy access to you money and can pay mostly capital gains rates. Convert the whole thing to a Roth if your gains are not too high. Then there's no tax on gains. The sooner the better.
Animorph is offline   Reply With Quote
Old 12-31-2013, 08:13 PM   #5
Recycles dryer sheets
Rothman's Avatar
Join Date: Apr 2013
Posts: 252
First, yes it is a good use of your money, but since you are contributing 100% after tax money the big benefit is immediate conversion to Roth so all the growth is tax free. As you wait you add tax penalty to the conversion. If you don't intend to convert then I'd recommend a taxable account is better. A good plan has a mix of all 3 types for the different phases of a long retirement.
Rothman is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


All times are GMT -6. The time now is 09:48 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.