@cadore wrote:
If someone's Modified Adjusted Gross Income is above the threshold for deductibility, a contribution to traditional IRA will still be beneficial since the growth portion will be tax-deferred, correct? And in this case, it will be a non-deductible IRA contribution as described in the subject is referred here, correct?
The real expert is @dmertz but, as far as I can see, there is very little benefit to making non-deductible contributions to a traditional IRA.
The growth is tax-deferred, but when you withdraw the money you pay income tax at ordinary income tax rates. If you simply invest the money in a brokerage account (stocks, bonds, mutual funds, etc.) you pay a little tax every year instead of only when you cash out, but at least some of the income (depending on the kind of investment) is taxed as long term capital gains, so a lower rate than ordinary income. It might make sense if you were invested in income-heavy securities and expected to be in a lower tax bracket when you retire, but it doesn't make sense to me if you are invested in growth securities (capital appreciation).
You also create a paperwork mess insofar as having to keep track of basis in an account that usually has zero basis.
