The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: starguru on October 29, 2013, 02:18:28 PM
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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?
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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.