To Non-Deductible or Not

[starguru]

Wife and I max out my 401ks.  Make too much to contribute to IRA or Roth.  We each have been putting money into P2P sites, but am wondering if we should each open a Non-deductible IRA with one of those sites and contribute there, because P2P is tax in-efficient.  If we do that, can we convert the non-deductible into a Roth? I heard there was some sort of back door.

What are the tax implications of non-deductible.  I know we contribute after tax dollars, so we need to keep track of the prinicple vs the gains, but are there any considerations other than that?

[fiveoclockshadow]

Unless you have a large traditional IRA balance with lots of earnings sitting around then your next move is definitely a "backdoor Roth" contribution.  Google it, or search here for the details.  You can "contribute" indirectly to a Roth regardless of income and that is much better than a non-deductible IRA.

If your 401k plan allows for non-deductible contributions to it (rare but some plans do) then that is a different path with some benefits.

But a non-deductible IRA on its own is your dead last option, do the backdoor Roth instead.