@Taxger wrote:
Thanks @Opus 17 . I guess there's a typo? You mean "even on after-tax contributions, the growth is NOT tax-free. "?
It's a matter of semantics. The growth in any IRA is tax-free at the time (unlike a regular investment account, where you pay tax every year on interest, dividends, and any capital gains that might have occurred from changing investment instruments or activity within a mutual fund). Because growth in the IRA is tax-free when it occurs, it is always taxable when withdrawn. (This is also why IRA withdrawals are taxable to a beneficiary after the original owners death, and don't get a stepped up basis--tax was never paid on the contributions, so it is always paid on the withdrawals.)
So my explanation essentially should have been read as, "the growth is tax-free when it occurs, so it is always taxable when withdrawn, even if some of that growth could be attributed to after-tax contributions."
