Traditional IRA or Taxable broketage account?

Wife and I have maxed 401(k)s this year, made too much for Roth IRA, and made too much to deduct traditional IRA contributions.

So, if I understand right, contributions to a traditional IRA are capped at $5500, would be with post-tax dollars, and every dollar distributed in retirement will be taxed,whereas taxable brokerage account would also be with post tax dollars, wouldn’t have a cap, and only gains would get taxed when withdrawn.

If above is all true, and there are no other “gotchas”, it seems I should dump any additional retirement savings into the taxable brokerage account. What have I misunderstood above and/or what “gotchas” have I overlooked?

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The other reason to go with a traditional non-deductible IRA contribution is that you could then do a backdoor Roth IRA conversion.


No, you wouldn’t pay taxes twice for a non-deductible IRA. You have at least a basis that is nontaxable.

But please research how withdrawals work when you have both deductible and non-deductible IRAs carefully. I have one that I now regret because it really complicates withdrawals. You cannot, for example, say you are withdrawing the money from your non-deductible IRA specifically. IRA withdrawals are across all your IRAs, pre-tax and post-tax and you have to figure that out.


If my Wife and I had maxed 401(k)s this year, made too much for Roth IRA, and made too much to deduct traditional IRA contributions, I would be looking into 529 and HSA contributions. If you don’t have a high deductible insurance plan, are somewhat healthy, and can switch to one next year, you should consider that for the tax beneficial HSA contributions. If you don’t have any kids and aren’t ever going to have any, then put it into stocks or real estate and don’t complicate your IRA.


As mentioned above, backdoor Roth IRA is your best bet. Google it for info, but basically it is this:
Open a new traditional IRA account if you don’t have a zero balance one already (keeps things tidy)
Contribute to traditional IRA
Immediately convert to Roth IRA
Go ahead and leave the empty traditional IRA account open for next year’s backdoor Roth