Annually around this time I struggle with the IRA funding decision. Several years ago it finally dawned on me that non-tax deductible contribs to a Traditional IRA are a bad idea because upon distribution they will be taxed at ordinary income rates. It's smarter to instead buy a stock to hold long-term: upon sale the capital gains tax rate will apply, which for me I project will be lower than the ordinary income rate after FIRE.
But when it comes to Roth IRAs, I'm not sure the numbers tilt the same way. The only IRA contrib for which I qualify is the non-tax deductible Traditional type, but immediately after the contrib I can convert it to Roth. The question becomes: does it make sense to pay tax on the contrib at ordinary rates now so as to gain the benefit of non-taxable growth inside the Roth, or it is better to simply dump the same post-tax amount into a stock to hold long term?
But when it comes to Roth IRAs, I'm not sure the numbers tilt the same way. The only IRA contrib for which I qualify is the non-tax deductible Traditional type, but immediately after the contrib I can convert it to Roth. The question becomes: does it make sense to pay tax on the contrib at ordinary rates now so as to gain the benefit of non-taxable growth inside the Roth, or it is better to simply dump the same post-tax amount into a stock to hold long term?