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Zev writes:

<<OTOH, I read somewhere that you should keep your deductible and non-deductible IRA accounts separate. The idea is that when you start withdrawing, you can choose which account to draw from, affecting your taxes. (Is this correct, Pixy?) >>

Not quite. Traditional IRAs are treated as one giant pool at the time of withdrawal. All are lumped together regardless of which one is used for the distribution. Thus, when nondeductible contributions are involved, part of any distribution will be free of tax and part will be taxed based on the ratio of those contributions to the market value of the IRA pool in the year of the withdrawal. When nondeductible contributions are made, Form 8606 must be filed with the income tax return for that year. Those forms should be retained forever because the are the proof the nondeductible contribution was made. When distributions start, Form 8606 is again filed to show what part of that distribution is free of tax. See IRS Pub 590 for details.

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