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<< As I understand it, the Roth IRA takes post-tax money and then there's no tax on withdrawal. So if a trader goes and opens a Roth, then trades a lot, then takes the money out, he has to pay just 10% (early withdrawal penalty) tax at most. Is my interpretation correct? I think the max one can put in each year is $2K, so the strategy has it's limits. >>

It has more limits than you realize. If you don't leave the money in for the required 5 years and until the required age, you pay tax on the earnings, PLUS the penalty. You could do this trading in a taxable account and pay only the income tax, skipping the penalty.

Phil Marti
Tax Preparer
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