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URL:  http://boards.fool.com/2-if-my-agi-is-too-high-does-it-still-make-10980091.aspx

Subject:  Re: IRA Qs Date:  6/23/1999  12:56 PM
Author:  rhecker Number:  11478 of 76082

2. If my AGI is too high, does it still make sense to open a conventional IRA?

I guess the benefit is that I wouldn't be taxed on gains when I traded through the IRA and the value of the benefit depends on how often I traded and how large the gains or losses were when I traded.


To answer one of your questions (above), the benefit of a non-detuctible IRA is that your gains are tax-deferred (which allows you to accumulate compound interest faster), and when you eventually withdrawl from the account, you are taxed at your income bracket (instead of the money being taxed as capital gains - which might actually NOT be a benefit depending on your tax bracket in retirement). In other words, it converts capital gains taxes into income taxes.

The amount of trading you do in an IRA as well as the individual gains or losses are largely unimportant (unless you spend your entire account on making trades or lose it all in some bad stocks). You are simply taxed at your income tax rate when you withdrawl the money (assuming it's a qualified withdrawl, etc...). Hopefully the overall gains in your IRA will be large!
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