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thanks .. I think my confusion is more, why make non-deductible contribution?

Because the earnings are still tax-deferred until withdrawn. For a great many people, their income in retirement will be lower than their income while working. So deferring income from working years to retirement years is usually beneficial.

When the earnings are withdrawn in retirement, they are taxed as ordinary income. So to the extent the earnings in an IRA come from ordinary income items (interest and short term capital gains, for example) the deferral works fine.

For earnings that would receive a lower tax rate (like qualified dividends and long term capital gains), you do have to consider the impact of converting these to ordinary income when they are in an IRA.

So you'd have to include that info in any analysis of non-deductible IRA vs. an ordinary account for investing.

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