I earn more than the income limit for both a Roth and Traditional IRA deduction. Should I contribute anyway?

By Denise Appleby AAA
A:

It is always a good choice to fund the individual retirement account (IRA), even if the owner is not eligible to claim the deduction. The IRA owner can still choose to invest the amount in the same funds within the IRA, where the earnings are tax deferred. The individual may also establish a self-directed IRA, in which he or she can diversify the portfolio to include stocks, bonds, mutual funds and any other investments allowed by the IRA custodian. When compared with a deductible contribution, the only benefit that is forgone is deducting the contribution, but this is rectified on the back end, as distributions of non-deductible contributions are tax and penalty free.

To learn more about contributing to an IRA, read IRA Contributions: Eligibility And Deadlines, Traditional IRA Deductibility Limits and Fundamentals Of A Successful Savings Program.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. How does the Canada Pension Plan (CPP) work, and what asset mix does it hold?

    Learn the difference between a chartered financial analyst and the Canadian pension plan. Explore Canadian retirement options ...
  2. Is it a good idea to add a reverse mortgage to your retirement strategy?

    A reverse mortgage can be a great way to increase retirement income. Does it work for everyone? What happens after a homeowner ...
  3. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ...
  4. What does amortization mean in the context of a pension plan?

    Discover when and why accountants use amortization techniques in the context of pension plans, and why those changes help ...
RELATED TERMS
  1. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  2. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  3. Gold IRA

    Definition of Gold IRA
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...

You May Also Like

Related Articles
  1. Professionals

    Just Retired? No Better Time for a Second ...

  2. Professionals

    When Your Client's Retirement is Around ...

  3. Professionals

    A New Wake-up Call for Savers

  4. Professionals

    Retirement Bliss? Not So fast: When ...

  5. Professionals

    Multiple Accounts? Here's How to Calculate ...

Trading Center