Yeap, since you cannot deduct your tIRA, you should instead just put this into a ROTH IRA.
At some point, you will no longer be allowed to contribute to a roth (income limit).
My income is over the limit for eligibility to contribute to ROTH, so instead, I take my after tax money ($5500 x 2) and invest into a traditional IRA on Jan1, and then on Jan2, I initiate a traditional->ROTH conversion. Roth is nice because once the money is >5 years seasoned, the principal can be withdrawn. I plan to use a ROTH ladder during my first 5 years of retirement.
On the traditional -> Roth conversion does the 5 year rule apply when the principal was originally put in the tIRA from after tax dollars? Seems like it shouldn't since taxes were paid on that money.
If you do the backdoor Roth conversion as illustrated, then while the 5-year rule on the conversion does apply, it only matters in terms of filling out the forms - significant tax and penalty won't be owed, regardless of when the conversion amount is withdrawn.
Due to ordering rules on unqualified distributions from a Roth IRA which are as follows:
1. Regular contributions
2. Conversions in chronological order
a. Taxable portion of each conversion first
b. Non-taxable portion on each conversion second
3. Earnings
If the conversion is done quickly as bryan995 illustrates, the taxable portion of the conversion will be very low - most likely 0. So as you're withdrawing, you've burned off the regular contribution amounts and you're on this conversion - 2a is 0, so your withdrawal is 2b. The additional tax is only due on the taxable portion, so you've got no income tax, nor any penalty to pay.
Still need to keep good records of course, because you may need to prove all of this to the IRS down the road.