The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: No-deductible IRA contribution||Date: 4/5/2001 3:56 PM|
|Author: PMcMullenCT||Number: 28927 of 82255|
If I make a contribution to a regular IRA account and it is not deductible on that year, then I end up pay tax twice on the money - once before I put it in and once when I take it out. Is that right?
No. You pay tax now on the after-tax contribution, becasue it is income earned this year. Over time, that contribution will (hopefully) grow. When you withdraw the money, you will pay tax only only the gains and pre-tax contributions, not on after tax contributions.
If it is right, does it make sense to do it?
Even though it is not right, it still doesn't make sense to do it.
Assuming you earn less than $150,000 or so, you should contribute those after-tax dollars to a Roth IRA. You still don't get a current year tax deduction, but when you make withdrawels in retirement, BOTH the contribution AND the gains are tax free.
|Copyright 1996-2017 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|