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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75378  
Subject: Re: Roth Catch-up Date: 11/29/2004 2:52 PM
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Author: Crosenfield | Date: 11/28/04 8:43 PM | Number: 43337
If your income level is too high for a Roth IRA, you are still entitled to a non-deductible traditional IRA.
You need to keep track of the total amount of non-deductible money you put into your traditional IRA, because you do not have to pay tax on that when you are older and start drawing on the IRA.
And even Bill Gates is entitled to a traditional, non-deductible IRA.


True, but the original poster also might consider buying and holding for the long term something like a Total Stock Market Index Fund (with dividends reinvested). This would allow capital gains and dividends to be taxed at a maximum of 15%. In a Traditional IRA, all capital gains and dividends are taxed at your marginal income tax rate when you withdraw them.

Of course, the tax laws can and will change, so there is no guarantee that today's 15% rate will last. However, capital gains have historically been taxed at a lower rate than marginal income, so I think holding a Total Market Index Fund will remain a good alternative to the Traditional IRA.

Russ
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