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Author: karisxu Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75339  
Subject: No-deductible IRA contribution Date: 4/5/2001 3:44 PM
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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?

If it is right, does it make sense to do it?
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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28927 of 75339
Subject: Re: No-deductible IRA contribution Date: 4/5/2001 3:56 PM
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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.

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Author: karisxu Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28943 of 75339
Subject: Re: No-deductible IRA contribution Date: 4/6/2001 10:36 AM
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>> 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.

Thanks. Do you know where did you read this? I was trying to find some information about that.

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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28944 of 75339
Subject: Re: No-deductible IRA contribution Date: 4/6/2001 10:54 AM
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No. You pay tax now on the after-tax contribution, because 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.

Thanks. Do you know where did you read this?

"If you made both deductible and non-deductible contributions, then each IRA withdrawal is taxed in proportion to the mix of deductible and non-deductible contributions in all your IRAs. For more information on calculating the tax, see IRS Publication 590."

http://www.neamb.com/lifeplan/retresctr/hww19.html

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