non-deductible redbud

Photo credit: jb

While many folks would tell you that it can be a good idea to make non-deductible contributions to your traditional IRA, I believe it’s in the “Bad Idea” category for most situations. This is primarily due to the way the tax law works for IRA and non-IRA money. There can be good reasons for non-deductible IRA contributions, but today we’ll focus on the downside.

IRA Taxation

As you may be aware, distributions from your IRA are generally subject to ordinary income taxation. Of course, your non-deductible contributions are not taxed, but any growth in your account and any deductible contributions will be taxed at the ordinary income tax rate.

And since non-deductible contributions (typically) make up a small amount of your total IRA balance when it comes time to withdraw the money, there is little benefit to be

Keep reading this article on Financial Ducks In A Row.

Leave a Reply