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danielrh wrote in part:
I am trying to determine if a non-deductible IRA will be better than a standard brokerage account as a savings vehicle for retirement. ...

You say you can't make deductible contributions, but you don't say if you fall below the $150K AGI to allow investing in a Roth IRA. If you qualify, the Roth is definitely the better option. Your contributions are taxable, but withdrawals after 59.5 are tax tree, and since this is an IRA, there is no capital gains taxes on trades in the account.

If you can't qualify for a Roth, then you'll have to run the numbers comparing a traditional IRA with a taxable brokerage account. A spreadsheet is the perfect tool for this. If you're going to practice a LTB&H strategy, then I'd expect the taxable brokerage account to come out way ahead (depending on time) because your tax rate at retirement should be quite a bit higher than the long term capital gains tax rate, and since you're not accumulating captial gains taxes along the way, that helps.

The situation is a lot greyer when you start talking about a FF strategy. Since you're buying and selling stock each year, if you're not in an IRA, you have to worry about capital gains taxes (try to make them long term if you take this route). The longer you have til retirement, the more attractive the IRA option looks in this scenario. But where the crossover point is, I don't know, or even if the taxable account approach is ever better.

Another thing to consider is you're limited in how much money you can invest in an IRA per year, but not so with a taxable account. You can have two IRA's (one for you, one for your wife), so that's $4k per year.

Bottom line is, if you can do a Roth, do that then a taxable account. If you can't do a Roth, then you need to sit down with a spreadsheet and get your hands dirty with some numbers. Think it through carefully, whatever you do.

--DarkOut
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