Discover the latest creative strategies and find out how today's top investors are utilizing them to build wealth and avoid taxation! - Join us at The Masters of Tax Avoidance Boot Camp in Houston, TX on March 30th. Click to learn more!

Pay Online

Contact

Call: 855-386-4727

Client Portal

Pay Online

Contact

Call: 855-FUN-IRAS

Client Portal

855-386-4727

  • Home
  • Education
    • Education Center
    • SDIRA Video Library
    • Upcoming Webinars (Live)
    • Our Blog
    • IRA Education Articles
    • Due Diligence
    • Prohibited Transactions
    • Security Awareness
    • FAQs
  • Open an Account
    • Traditional IRA
    • Roth IRA
    • SEP IRA
    • SIMPLE IRA
    • Health Savings Account (HSA)
    • Coverdell Education Savings Account (ESA)
    • Solo 401(k)
    • Checkbook Control IRA LLC
    • Referral Program
  • Investments
    • The QTC Investment Hub
    • Real Estate
    • Promissory Notes
    • Private Entities
    • Cryptocurrency Investing
    • General Investments
    • Fair Market Values (FMV)
  • Forms
  • Events
    • SDIRA LIVE Webinars
    • Quest Special Events
    • Houston Events
    • Dallas Events
    • Austin & San Antonio Events
    • Other Cities – tbd
    • The Quest Expo
    • Invite Quest to Speak
  • About
    • Mission Statement
    • Client Testimonials
    • Executive Team
    • Meet the Management & Education Team
    • FDIC: Federal Deposit Insurance Corporation
  • Client Portal
  • Contact Us
    • Make a Payment
    • General Contact Information
    • Contact a Certified IRA Specialist
    • Career Opportunities
    • Coronavirus (COVID-19) Resource
Quest Trust Company›Blog›Traditional Iras

Tag: Traditional Iras

Why Bother With a Non-Deductible IRA?

Posted on January 6, 2014April 12, 2021 by questadmin
Estimated reading time: 3 minutes

Many individuals first become interested in opening an Individual Retirement Account when they learn that in some situations their annual contributions are deductible on their current year’s tax return. It’s important to understand that the term “deductible IRA” refers to traditional IRAs, as opposed to the Roth IRA structure. But it’s also important to know that the actual deductibility will depend on a number of factors, and that not all contributions to a traditional IRA are deductible.

The concept of a “non-deductible IRA” therefore refers to Roth IRAs and sometimes to traditional IRAs. Here are some reasons why, despite the non-deductibility of contributions to those accounts, they can still be an extremely valuable part of your retirement planning.

To Save on Taxes Later in Life

If you have a Roth IRA, the withdrawals you make in retirement will not be subject to federal income tax. Since the majority of your IRA account balance will likely be comprised of earnings, the total value of tax savings down the road will far exceed the value you’d obtain from having your contributions be tax deductible.

To Avoid the Rules on Required Minimum Distributions

Once you reach age 72, you must begin taking annual distributions from a traditional IRA, and these distributions must be above a certain minimum amount (which varies with your age and account balance). This will not only reduce the amount of savings you have growing on a tax deferred basis, but also subject you to current year taxation on the amount of the distributions. Roth IRAs are not subject to these rules, so some people are willing to give up current year deductibility by making contributions to a Roth account.

Estate Planning Advantages

The rules on passing on Roth IRAs are much more flexible and advantageous; so many individuals choose that account structure in order to help them better achieve their estate planning goals.

If You’re Covered by a 401(k) Plan at Work

All of the advantages of making non-deductible contributions highlighted above apply to Roth IRAs. But there are also situations where you might want to make non-deductible contributions to a traditional IRA as well.

For example, some individuals choose to participate in an employer sponsored retirement program such as a 401(k). Participation in a 401(k) plan won’t affect their ability to contribute to an IRA (either a Roth or a traditional account), but it will impact their ability to take a tax deduction for a contribution to a traditional account. For 2021, single taxpayer who’s covered by a 401(k) can’t take a deduction for their traditional IRA contribution if their modified adjusted gross income is over a certain limit. This means that in order to make a contribution to their IRA account (which is always a good idea from a long term perspective), that person will need to make a non-deductible contribution to a traditional account.

Posted in How To Retire Well | Self Directed IRAsTagged 401, Deductible Ira, Individual Retirement Account, Non Deductible Ira, Roth Ira, Roth Iras, Traditional Ira, Traditional IrasLeave a comment
  • Lunch & Learns

    Lunch & Learns

    Browse all of our upcoming events here!  The only thing better than free education & deal pitching is free lunch, too, and you can get it all at this Lunch & Learn. At Quest Trust Company, we believe to truly take control, you should invest in what you know best! So, what do you do […]

    Register NowSee All Events
  • SDIRA Saturday Webinar

    SDIRA Saturday Webinar

    Browse all of our upcoming events here!  At Quest Trust Company, we believe to truly take control, you should invest in what you know best! So, what do you do if you want to invest in a private asset, but you don’t feel like you know enough? You learn, of course! Make sure to join […]

    Register NowSee All Events
  • #NationalNetworking Virtual Happy Hour

    #NationalNetworking Virtual Happy Hour

    Browse all of our upcoming events here!  Get ready for NATIONAL NETWORKING We want to invite you to grab a drink and come network with us at our Virtual Networking Happy Hour! Share your deals and services with new faces from across the nation every 4th Wednesday of the month! No matter what you’re interested […]

    Register NowSee All Events
  • The SDIRA Social

    The SDIRA Social

    Browse all of our upcoming events here!  Tapping into TRILLIONS of dollars’ worth of investment capital for your real estate deals is easier than you think. All it takes is the right conversation, and you could potentially unlock unlimited capital for your deals. If you’re looking for ways to increase your net worth by improving […]

    Register NowSee All Events
  • Our transition from Bancorp South Bank to Frost Bank

    Our transition from Bancorp South Bank to Frost Bank

    We expect this transition to be smooth and easy, requiring almost no changes on the client end! There are no new systems to learn nor any account changes to make. The only update to be aware of is the new Incoming Funds Instructions. The old instructions for Bancorp South will no longer be applicable or […]

    Register NowSee All Events
  • Fast & Easy Investing with QTC Investment Hub!

    Fast & Easy Investing with QTC Investment Hub!

    With this feature, you can now submit investments directly through the client portal and track your investments in real time!

    Register NowSee All Events
  • It Pays to Have Friends!

    It Pays to Have Friends!

    Start raking in the rewards for the services you love. Refer a friend to Quest and receive a credit towards your account!   How to Begin Earning Credits: 1. Visit OUR REFERRAL PROGRAM PAGE, and enter your name, your friends email and their phone number in the referral box! 2. Your friend will then receive […]

    Register NowSee All Events
  • Virtual Classes + Networking

    Virtual Classes + Networking

    Check out our full class schedule here! Our weekly Quest webinars give you access to unlimited free education! Get the knowledge to help grow your retirement at one of our weekly classes on Tuesdays and Saturdays at 12PM CT! And don’t miss our Virtual Networking Happy Hours on the 4th Wednesday of every month – […]

    Register NowSee All Events

More Upcoming Events

  • Houston Events
  • Austin Events
  • Dallas Events
  • Upcoming National Webinars
  • Client Referral Program
  • Blogs
  • Security Awareness
  • Testimonials
  • Due Diligence
  • FAQs
  • FDIC Insurance
  • Career Opportunities
  • Contact Us
  • The Quest Expo
  • Quest Con: Forecasting 2023

Connect with Us:

DISCLAIMER: Quest Trust Company does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.

© 2021 Quest Trust Company. View our Terms of Use.

© 2021 Quest Trust Company. View our Terms of Use.