In the US, if you make a lot, are covered by a work retirement account or you contribute to a Roth, you can’t deduct traditional ira contributions right?
So that money gets added to the rest of your traditional ira monies right? and then when you hit retirement age, you have to pay income level taxes on deductions on that already post tax money right?
Why get taxed twice? What’s the benefit? +Not being able to touch it til retirement age.
My understanding of this (just worked through it with my wife) is that you will not take a tax hit on the disbursement when you take it but you will get hit with capitol gains taxes on it’s growth from inception of your contributions.
When you take it out, it has already been taxed but it will still count as income for your tax planning purposes in the year you receive it - hopefully you’re in a lower tax bracket when this occurs. It is not a taxable income (though it counts as an income and increases your tax bracket accordingly) but it’s growth since contribution will cost you at your current tax bracket as you take it.
Not a financial wizard here, ask a professional.