No. of Recommendations: 2
Since withdrawals of gains from the IRA would be taxed as ordinary income while both long term capital gains and qualified dividends are taxed at a lower rate, why would there be any advantage in putting money into an after-tax IRA?

If one's investment plan calls for some tax-inefficient investments, such as bonds or REITS, if there is room, it is best to hold them in a "tax favored" account of some sort, even a Traditional IRA funded with non-deductible contributions so the interest or non-preferred dividends could be reinvested and thus allowed to grow tax deferred.

In years when one makes non-deductible contributions to a Traditional IRA, one should also file IRS Form 8606 with one's federal tax returns for that year to preserve one's "tax basis" (after-tax contributions) so that, when one makes withdrawals, income taxes would be on the part of the withdrawal not represented by return of after-tax contributions.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.