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Author: jkrou Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75592  
Subject: Re: Non-Deductible IRA Strategy Date: 3/18/2001 10:18 AM
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Melrosest:
I think that the idea is that non-deductible contributions will be taxed at your marginal tax rate while gains from a taxable account will only be subject to the lower long term capital gains tax.

Given those two choices, it puts more money in your pocket the majority of the time by choosing the taxable account. Think about it, at the lowest tax bracket (15%) you are paying less for capital gains than income from your IRA; this will hold true all the way up the scale so why would you really want to be making the non-deductible contributions?

Non-deductible contributions do have an advantage of tax free growth if invested in mututal funds while a taxable account would create a taxable event each year held when it distributes its annual gains and dividends. However, in the long run I believe it is better to swallow the annual gains taxed today versus the growing non-deductible which will have higher taxes over their withdrawal period.

Just my thoughts,
Jenn
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