We are not eligible for a Roth IRA. Additionally we would be subject to the pro rata rule for the back door Roth due to existing IRAs. Should we contribute to a non deductible IRA? Or just contribute to a brokerage account?
We were thinking with the non deductible IRA, we would be taxed at ordinary income on earnings upon retirement whereas a brokerage account would be capital gains rate which is lower currently. Thoughts?
Hi Jennifer!
Do you plan on using the money prior to 59 1/2? If not, it may still be more beneficial to contribute a non-deductible IRA because earnings grow tax free.
However, it would be wise to keep the non-deductible IRA separate from your existing IRA for accounting purposes.
Please consult with your CPA for more information about keeping track of your deductible contributions and non-deductible contributions.
If you do not want to deal with the accounting hassle, then you can always add to your brokerage account. If you have not max out your 401k or other retirement accounts, you can also add to those accounts instead.
Good luck!