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.
That depends on a number of details that may or may not apply to you.
You can contribute up to $6,500 ($7000 next year) to any mix of IRA that you’re eligible for. There’s a phase out range for deductions if you have a retirement plan at work (between $116,000 and $136,000 this year’s MAGI, which is gross - payroll deductions). If you’re married, your spouse follows different rules depending on whether they have a workplace retirement account.
If you’re above the phaseout range, you won’t be double taxed, but any growth will be taxed. So if you invest $6k and it increases by $3k, and then your withdraw it all at regular retirement age, you’ll pay taxes on $3k. This gets complicated when you factor in the pro rata rule (e.g. if you withdraw half, you’ll take half from each bucket, so $1500 will be taxed and $3k won’t), to the point where I recommend people don’t bother. The benefit is that you avoid capital gains on growth and only pay when you withdraw, which means any trades in your IRA aren’t reported to the IRS.
If you’ll likely be above the deduction range for most of your career, I recommend doing a backdoor Roth, which means immediately converting contributions to a traditional IRA to a Roth IRA, so you essentially get the benefits of a Roth IRA, but without being eligible. There are caveats here as well, so read up on it.
I’m happy to work through examples, I just need to know what your situation is.