Jun 3

So, i heard there are technically 2 types of traditional iras. The tax deductible/tax-deffered, or non tax deductible.
If someone is not eligible for tax deductible, why would someone want a non-tax deductible traditional ira. especially if the have to pay taxes twice. once when they go in, and once when they go out.
it just doesnt make sense why they would even offer it as a choice, what am i missing?

3 comments so far...

  • wartz Said on June 3rd, 2010 at 9:41 pm:

    It is a reasonable choice if you have used up all your eligibility with a Roth IRA.

  • Uther Aurelianus Said on June 3rd, 2010 at 10:34 pm:

    All IRAs are taxed, it’s just a matter of when the taxes are applied. A non deductible type is taxed now. The others are taxed when the are cashed in.

  • efflandt Said on June 3rd, 2010 at 10:55 pm:

    If someone has too much income to qualify for a Roth IRA, they can still make non-deductable contributions to a traditional IRA. The gains are tax deferred. The contributions are not taxed twice. They are deducted gradually (pro-rated) from distributions before figuring tax (Form 8606). But you have to keep long term records if you do not want to be taxed twice.

    Before I knew about Roths (or maybe before they existed), I made a non-deductable contribution to a regular IRA. When I started doing IRA to Roth IRA conversions in 2005, I had to find locate my tax return from an unknown year (which ended up being 1991).

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