Proposed update to Non-Deductible IRA wiki article

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fyre4ce
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Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Tue Jan 14, 2020 8:24 pm

Been working on an update to the Non-Deductible IRA article for a while, and I think it's time to get public comment:

https://www.bogleheads.org/wiki/User:Fy ... tional_IRA

Objectives for the rewrite are:
-Update data for 2020
-Make the mechanics of a Traditional IRA more clear, including the Pro Rata rule (there's lots of confusion about this on the boards)
-Make clearer the appropriate situations for a ND tIRA
-Remove lower-value information that uses up valuable space in the article (eg. historical annual contribution limits) - this is available elsewhere if needed, but cases are rare
-Add more detail on comparison to a taxable account
-Add more detail on performance compared to a taxable account, relative to different kinds of investments

Hope the community likes the change. Discuss!

Edit: There has been some feedback that the title of this article is misleading, implying that a ND-tIRA is a separate type of account. After some thought, my favored approach now is to rewrite the main Traditional IRA article and move much of the "Description" section of my article over to the main one, rename my article "After-tax investment in a Traditional IRA", and have it be more predominantly focused on the suitability of after-tax tIRA contributions and the comparison to other accounts, especially the taxable account. I'm working with the site admins to create a user page rewrite of Traditional IRA. Any feedback on this approach would be appreciated.
Last edited by fyre4ce on Mon Jan 20, 2020 4:18 pm, edited 1 time in total.

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Thu Jan 16, 2020 7:26 pm

*bump*

kaneohe
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Re: Proposed update to Non-Deductible IRA wiki article

Post by kaneohe » Thu Jan 16, 2020 8:55 pm

Suggest you present some actual 8606 examples.....one w/ 0 yr end balance and another with a large yr end balance. Maybe even
present as problems w/ blank 8606 that forces reader to complete the form instead of reading a bunch of words. You could present
the completed 8606 in an appendix .

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Thu Jan 16, 2020 9:30 pm

kaneohe wrote:
Thu Jan 16, 2020 8:55 pm
Suggest you present some actual 8606 examples.....one w/ 0 yr end balance and another with a large yr end balance. Maybe even
present as problems w/ blank 8606 that forces reader to complete the form instead of reading a bunch of words. You could present
the completed 8606 in an appendix .
That's a good idea, but I'll suggest that this goes on a separate page of "Form 8606 Examples". Could include examples of using it for long-term investment, as well as various Backdoor Roth IRA situations.

kaneohe
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Re: Proposed update to Non-Deductible IRA wiki article

Post by kaneohe » Fri Jan 17, 2020 9:06 am

In the section on Backdoor Roth IRAs, the last statement is this:

"See the main article for a discussion of ways to dispose of a pre-tax IRA that is preventing Backdoor Roth IRA contributions."

Perhaps you could make the active link to the main article, the bolded words above. That way it would be obvious where the link was and an important concept would be made easily available. It took me a while to find the active link at the top of that section and while obvious in retrospect, it wasn't in the beginning.............and I could easily see the same threads about backdoor problems continuing forever.

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Sat Jan 18, 2020 5:34 pm

kaneohe wrote:
Fri Jan 17, 2020 9:06 am
In the section on Backdoor Roth IRAs, the last statement is this:

"See the main article for a discussion of ways to dispose of a pre-tax IRA that is preventing Backdoor Roth IRA contributions."

Perhaps you could make the active link to the main article, the bolded words above. That way it would be obvious where the link was and an important concept would be made easily available. It took me a while to find the active link at the top of that section and while obvious in retrospect, it wasn't in the beginning.............and I could easily see the same threads about backdoor problems continuing forever.
Will do for sure!

kaneohe
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Re: Proposed update to Non-Deductible IRA wiki article

Post by kaneohe » Sun Jan 19, 2020 10:05 am

Perhaps re-think the title...........it reinforces the idea that there is such an animal (non-deductible IRA) and that it can be treated
in isolation when in reality it is the contributions that are deductible/non-deductible, not the IRA itself. The clarifying words do say that
in some fashion but the titles/tables perhaps are more influential as evidenced by the continuing many threads that refer to non-deductible IRAs.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by Alan S. » Sun Jan 19, 2020 10:37 am

kaneohe wrote:
Sun Jan 19, 2020 10:05 am
Perhaps re-think the title...........it reinforces the idea that there is such an animal (non-deductible IRA) and that it can be treated
in isolation when in reality it is the contributions that are deductible/non-deductible, not the IRA itself. The clarifying words do say that
in some fashion but the titles/tables perhaps are more influential as evidenced by the continuing many threads that refer to non-deductible IRAs.
Absolutely! + 1

lkar
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Re: Proposed update to Non-Deductible IRA wiki article

Post by lkar » Sun Jan 19, 2020 10:46 am

This may be a pet peeve that doesn’t bother others and that I guess potentially is more confusing than not. But a traditional IRA balance that cannot be rolled into a 401k does not “prevent” you from doing a backdoor Roth as stated in the applicable uses section. It only limits its effectiveness in the year you make it (depending on your IRA balance) and shifts the year you can take the deduction, which may actually be beneficial to some taxpayers.

Along these same lines, in addition to the SEP pro rata example I might consider giving an example of what happens with a backdoor roth with a tIRA balance. Like:

Rollover IRA from prior job all pre-tax worth $25,000 at end of year. Over 50 not eligible for roth contribution and 401k won’t accept the rollover IRA. Contributes $7k to tIRA and converts to Roth at end of the year. $1533 of the conversion is tax free. Taxpayer pays tax on $5467 of roth conversion, now has $5467 in basis in rollover IRA instead of $0.

Same example except taxpayer not only converts $7k to Roth but converts $5k from rollover IRA to Roth. This taxpayer pays tax on only $9372 of the $12k roth conversion and now has a basis of $4372 in the $20k rollover IRA.

No tax on growth in Roth after conversion, so still a reason to consider both cases over leaving the money in IRA and subjecting growth above basis to tax.

Again, possibly too complicated, I understand. And virtually irrelevant if IRA balance is high, as noted in the wiki.

Another minor point is that the decision whether to roll a tIRA into a 401k has many implications and might not be prudent just to do backdoor Roth. For example if the options in the 401k stink, or if the taxpayer thinks she might want to do taxable Roth conversions in the future (in a low income year) but the 401k doesn’t have a conversion option or allow in-service rollovers back out to a rollover IRA. Not sure there is room for that in this wiki.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by is50xenough » Sun Jan 19, 2020 12:48 pm

fyre4ce wrote:
Tue Jan 14, 2020 8:24 pm
Been working on an update to the Non-Deductible IRA article for a while, and I think it's time to get public comment:

https://www.bogleheads.org/wiki/User:Fy ... tional_IRA

Objectives for the rewrite are:
-Update data for 2020
-Make the mechanics of a Traditional IRA more clear, including the Pro Rata rule (there's lots of confusion about this on the boards)
-Make clearer the appropriate situations for a ND tIRA
-Remove lower-value information that uses up valuable space in the article (eg. historical annual contribution limits) - this is available elsewhere if needed, but cases are rare
-Add more detail on comparison to a taxable account
-Add more detail on performance compared to a taxable account, relative to different kinds of investments

Hope the community likes the change. Discuss!
Since this is an area I have been thinking about, hope these suggestions are worthwhile and that they don't reveal that I still have many misunderstandings.

First paragraph: would it help others to use the various potential synonyms for "non-deductible" IRA? Meaning spelling out you have already paid taxes on contributed money or 'deductible'/you have not paid taxes on money and/or use pretax, posttax. Personally all the terms get confusing and joining all terms might help some. At end of first paragraph it lists contribution limits but these will be for specific tax years or through years so might add the "as of 2020" phrase in there

Description section: update year, I think "basis" needs simple explanation

Is it worth giving simple example of backdoor roth conversion with varying amounts from 0 to $100,000 in a tIRA? could vary how much in the tIRA is deductible or non-deductible with how much $ would need to have taxes paid?

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Sun Jan 19, 2020 2:23 pm

kaneohe wrote:
Sun Jan 19, 2020 10:05 am
Perhaps re-think the title...........it reinforces the idea that there is such an animal (non-deductible IRA) and that it can be treated
in isolation when in reality it is the contributions that are deductible/non-deductible, not the IRA itself. The clarifying words do say that
in some fashion but the titles/tables perhaps are more influential as evidenced by the continuing many threads that refer to non-deductible IRAs.
What do you suggest? "Non-deductible contributions to a Traditional IRA"? Compactness is my only concern. In my rewrite I tried to fully explain that a ND-tIRA is not a separate account, although I I agree the title could be misleading. What do you suggest?

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Sun Jan 19, 2020 4:17 pm

lkar wrote:
Sun Jan 19, 2020 10:46 am
This may be a pet peeve that doesn’t bother others and that I guess potentially is more confusing than not. But a traditional IRA balance that cannot be rolled into a 401k does not “prevent” you from doing a backdoor Roth as stated in the applicable uses section. It only limits its effectiveness in the year you make it (depending on your IRA balance) and shifts the year you can take the deduction, which may actually be beneficial to some taxpayers.
This is somewhat of a semantic issue. An attempted Backdoor Roth IRA with a large pre-tax IRA becomes a Roth conversion, which may or may not be desirable. If you define a Backdoor Roth IRA as having the same net effect as a direct Roth IRA contribution, then the pre-tax IRA does "prevent" it. If instead it just means a non-deductible tIRA contribution plus a Roth conversion, regardless of the tax consequences, then a pre-tax IRA does not prevent it. In any case, I feel like this issue is more appropriate for the Backdoor Roth IRA article.
lkar wrote:
Sun Jan 19, 2020 10:46 am
Along these same lines, in addition to the SEP pro rata example I might consider giving an example of what happens with a backdoor roth with a tIRA balance. Like:

Rollover IRA from prior job all pre-tax worth $25,000 at end of year. Over 50 not eligible for roth contribution and 401k won’t accept the rollover IRA. Contributes $7k to tIRA and converts to Roth at end of the year. $1533 of the conversion is tax free. Taxpayer pays tax on $5467 of roth conversion, now has $5467 in basis in rollover IRA instead of $0.

Same example except taxpayer not only converts $7k to Roth but converts $5k from rollover IRA to Roth. This taxpayer pays tax on only $9372 of the $12k roth conversion and now has a basis of $4372 in the $20k rollover IRA.

No tax on growth in Roth after conversion, so still a reason to consider both cases over leaving the money in IRA and subjecting growth above basis to tax.

Again, possibly too complicated, I understand. And virtually irrelevant if IRA balance is high, as noted in the wiki.
What I have there is pretty close, no?

The pro-rata rule has some unexpected details. The rule is applied to the combined balance of ALL Traditional IRAs, SEP-IRAs, and SIMPLE IRAs that an individual owns. For example, if you have a $10,000 Traditional IRA with a $10,000 basis (all non-deductible contributions) and a $90,000 SEP-IRA, a $10,000 withdrawal from the Traditional IRA, only 10% ($10,000 / ($10,000 + $90,000)) will be withdrawal of basis and 90% will be taxable. Even though the Traditional IRA has a balance of $0 and could even be closed, the remaining $9,000 of basis is effectively transferred to the SEP-IRA.
lkar wrote:
Sun Jan 19, 2020 10:46 am
Another minor point is that the decision whether to roll a tIRA into a 401k has many implications and might not be prudent just to do backdoor Roth. For example if the options in the 401k stink, or if the taxpayer thinks she might want to do taxable Roth conversions in the future (in a low income year) but the 401k doesn’t have a conversion option or allow in-service rollovers back out to a rollover IRA. Not sure there is room for that in this wiki.
That's a good suggestion. I think the main discussion belongs in the Backdoor Roth IRA article but I can add that reference.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by trueblueky » Sun Jan 19, 2020 4:25 pm

fyre4ce wrote:
Tue Jan 14, 2020 8:24 pm
Been working on an update to the Non-Deductible IRA article for a while, and I think it's time to get public comment:

https://www.bogleheads.org/wiki/User:Fy ... tional_IRA

Objectives for the rewrite are:
-Update data for 2020
-Make the mechanics of a Traditional IRA more clear, including the Pro Rata rule (there's lots of confusion about this on the boards)
-Make clearer the appropriate situations for a ND tIRA
-Remove lower-value information that uses up valuable space in the article (eg. historical annual contribution limits) - this is available elsewhere if needed, but cases are rare
-Add more detail on comparison to a taxable account
-Add more detail on performance compared to a taxable account, relative to different kinds of investments

Hope the community likes the change. Discuss!
The article says that whether to deduct a traditional IRA contribution is an option for the taxpayer. At certain tax levels, explained later, it is not optional. Contributions are partially deductible in a certain range, which leads to the pro rata situation. Above that, none are deductible. In the none range, Roth is preferable.

I think explaining the three range separately would be wise.

lkar
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Re: Proposed update to Non-Deductible IRA wiki article

Post by lkar » Sun Jan 19, 2020 5:34 pm

fyre4ce wrote:
Sun Jan 19, 2020 4:17 pm
lkar wrote:
Sun Jan 19, 2020 10:46 am
This may be a pet peeve that doesn’t bother others and that I guess potentially is more confusing than not. But a traditional IRA balance that cannot be rolled into a 401k does not “prevent” you from doing a backdoor Roth as stated in the applicable uses section. It only limits its effectiveness in the year you make it (depending on your IRA balance) and shifts the year you can take the deduction, which may actually be beneficial to some taxpayers.
This is somewhat of a semantic issue. An attempted Backdoor Roth IRA with a large pre-tax IRA becomes a Roth conversion, which may or may not be desirable. If you define a Backdoor Roth IRA as having the same net effect as a direct Roth IRA contribution, then the pre-tax IRA does "prevent" it. If instead it just means a non-deductible tIRA contribution plus a Roth conversion, regardless of the tax consequences, then a pre-tax IRA does not prevent it. In any case, I feel like this issue is more appropriate for the Backdoor Roth IRA article.
lkar wrote:
Sun Jan 19, 2020 10:46 am
Along these same lines, in addition to the SEP pro rata example I might consider giving an example of what happens with a backdoor roth with a tIRA balance. Like:

Rollover IRA from prior job all pre-tax worth $25,000 at end of year. Over 50 not eligible for roth contribution and 401k won’t accept the rollover IRA. Contributes $7k to tIRA and converts to Roth at end of the year. $1533 of the conversion is tax free. Taxpayer pays tax on $5467 of roth conversion, now has $5467 in basis in rollover IRA instead of $0.

Same example except taxpayer not only converts $7k to Roth but converts $5k from rollover IRA to Roth. This taxpayer pays tax on only $9372 of the $12k roth conversion and now has a basis of $4372 in the $20k rollover IRA.

No tax on growth in Roth after conversion, so still a reason to consider both cases over leaving the money in IRA and subjecting growth above basis to tax.

Again, possibly too complicated, I understand. And virtually irrelevant if IRA balance is high, as noted in the wiki.
What I have there is pretty close, no?

The pro-rata rule has some unexpected details. The rule is applied to the combined balance of ALL Traditional IRAs, SEP-IRAs, and SIMPLE IRAs that an individual owns. For example, if you have a $10,000 Traditional IRA with a $10,000 basis (all non-deductible contributions) and a $90,000 SEP-IRA, a $10,000 withdrawal from the Traditional IRA, only 10% ($10,000 / ($10,000 + $90,000)) will be withdrawal of basis and 90% will be taxable. Even though the Traditional IRA has a balance of $0 and could even be closed, the remaining $9,000 of basis is effectively transferred to the SEP-IRA.
lkar wrote:
Sun Jan 19, 2020 10:46 am
Another minor point is that the decision whether to roll a tIRA into a 401k has many implications and might not be prudent just to do backdoor Roth. For example if the options in the 401k stink, or if the taxpayer thinks she might want to do taxable Roth conversions in the future (in a low income year) but the 401k doesn’t have a conversion option or allow in-service rollovers back out to a rollover IRA. Not sure there is room for that in this wiki.
That's a good suggestion. I think the main discussion belongs in the Backdoor Roth IRA article but I can add that reference.
Yes, I see your point on it being semantics.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by rai » Sun Jan 19, 2020 6:09 pm

Does the pro rata rule (for non taxable IRA) effect me when I retire and convert my IRAs into Roth IRA?

I was looking at this
https://www.forbes.com/sites/ashleaebel ... 8e816855ad

would I do best to roll in the IRA to my 401K if possible?
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Re: Proposed update to Non-Deductible IRA wiki article

Post by Alan S. » Sun Jan 19, 2020 7:15 pm

rai wrote:
Sun Jan 19, 2020 6:09 pm
Does the pro rata rule (for non taxable IRA) effect me when I retire and convert my IRAs into Roth IRA?

I was looking at this
https://www.forbes.com/sites/ashleaebel ... 8e816855ad

would I do best to roll in the IRA to my 401K if possible?
Pro rating will always apply if there is a pre tax IRA balance at year end. As the article indicates, you can avoid that if you roll the pre tax IRA balance into your 401k while you are still working. Most 401k plans will not accept an IRA rollover after you separate. You can then convert your IRA basis tax free.

You should do this before RMDs begin, not only because you probably are not still working then, but if you wait until your IRA is subject to RMDs, then you have to complete the RMD before doing the rollover to the 401k.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by JDDS » Mon Jan 20, 2020 1:43 am

Thanks for working on this update.

In the table for comparing between the accounts, should the descriptions for withdrawals between non-deductable and taxable be the same? Growth is fully taxed; return of basis is tax-free

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Re: Proposed update to Non-Deductible IRA wiki article

Post by celia » Mon Jan 20, 2020 4:50 am

I think the whole wiki page should be deleted since there is no such "animal". Even if every contribution made to the IRA is non-deductible, once a dollar of growth is earned, that growth is pre-tax. So the IRA will almost always contain pre-tax and post-tax money. And I don't think we should be expanding on/promoting questionable terminology, to begin with. The Backdoor Roth wiki page includes the same concepts that apply to this IRA, whether withdrawals are converted or just moved to a taxable account.

When I upgraded the Backdoor IRA wiki page, getting rid of this wiki page was considered, but because of multiple problems in this wiki page and forum references to it, I just let it be. But the best solution, in my opinion, is to get rid of it or simply change it to reference the Traditional IRA instead and remind the reader that it is the contributions that are deductible or not.


OP, Thank you for trying to work on this as I have always seen this page as problematic. I know the Backdoor Roth wiki page ended up being more complicated to edit than I had expected as the earlier version of that page just had bad information and was lacking in many details..
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by celia » Mon Jan 20, 2020 5:12 am

Alan S. wrote:
Sun Jan 19, 2020 10:37 am
kaneohe wrote:
Sun Jan 19, 2020 10:05 am
Perhaps re-think the title...........it reinforces the idea that there is such an animal (non-deductible IRA) and that it can be treated
in isolation when in reality it is the contributions that are deductible/non-deductible, not the IRA itself. The clarifying words do say that
in some fashion but the titles/tables perhaps are more influential as evidenced by the continuing many threads that refer to non-deductible IRAs.
Absolutely! + 1
I was just searching for the term "Non-deductible IRA" in the forum and there doesn't appear to be as many references to this as there used to be (other than in this thread). When a newer person refers to one, the replies mostly respond by talking about "non-deductible contributions" instead.

It looks like we've made progress here in educating ourselves and others!
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by slick_dealer_05 » Mon Jan 20, 2020 6:56 am

Discussion on pro-rata rule is very confusing. I got completely lost in the first paragraph.
Seriously consider rewording it or presenting better examples.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Mon Jan 20, 2020 11:55 am

slick_dealer_05 wrote:
Mon Jan 20, 2020 6:56 am
Discussion on pro-rata rule is very confusing. I got completely lost in the first paragraph.
Seriously consider rewording it or presenting better examples.
Can you suggest a clearer example?

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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Mon Jan 20, 2020 12:16 pm

celia wrote:
Mon Jan 20, 2020 4:50 am
I think the whole wiki page should be deleted since there is no such "animal". Even if every contribution made to the IRA is non-deductible, once a dollar of growth is earned, that growth is pre-tax. So the IRA will almost always contain pre-tax and post-tax money. And I don't think we should be expanding on/promoting questionable terminology, to begin with. The Backdoor Roth wiki page includes the same concepts that apply to this IRA, whether withdrawals are converted or just moved to a taxable account.

When I upgraded the Backdoor IRA wiki page, getting rid of this wiki page was considered, but because of multiple problems in this wiki page and forum references to it, I just let it be. But the best solution, in my opinion, is to get rid of it or simply change it to reference the Traditional IRA instead and remind the reader that it is the contributions that are deductible or not.


OP, Thank you for trying to work on this as I have always seen this page as problematic. I know the Backdoor Roth wiki page ended up being more complicated to edit than I had expected as the earlier version of that page just had bad information and was lacking in many details..
I'm definitely with you on correct terminology. Others have pointed out that the title could be misleading. If we keep the article, I would lean toward a change in title.

I would suggest that the "meat" of the ND-tIRA article is the performance analysis and the comparison to the taxable account (and the criteria for using a ND-tIRA that goes along with it). The IRA mechanics and Backdoor content is secondary. From an analysis perspective, fully deductible and Roth accounts are very similar (only difference being that the taxes are taken at the end vs. beginning), and a non-deductible tax-deferred account (there are others besides a ND-tIRA, like a VA or permanent life insurance) is more comparable to a taxable account. Those considering making non-deductible contributions, other than for a Backdoor Roth IRA, should be aware of the pros and cons compared to a taxable account. If this content is moved to the tIRA article, it would make it much longer, and is a different than the most common and best use (fully deductible), so for that reason I lean toward keeping it separate. But I'm happy to hear other opinions.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Mon Jan 20, 2020 12:23 pm

JDDS wrote:
Mon Jan 20, 2020 1:43 am
Thanks for working on this update.

In the table for comparing between the accounts, should the descriptions for withdrawals between non-deductable and taxable be the same? Growth is fully taxed; return of basis is tax-free
As it's written now, the difference is that "Growth is fully taxed; return of basis is tax-free" for a ND-tIRA and "Capital gains are taxed; return of basis is tax-free". I wrote it that way to emphasize that types of growth that are taxed in the year they are earned (interest, dividends, distributions) have already been taxed and don't generate any additional taxes when withdrawn, whereas the ND-tIRA defers these types of growth until withdrawal, so they are taxed then.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by celia » Mon Jan 20, 2020 5:12 pm

fyre4ce wrote:
Mon Jan 20, 2020 12:16 pm
I'm definitely with you on correct terminology. Others have pointed out that the title could be misleading. If we keep the article, I would lean toward a change in title.
I propose the title "Traditional IRAs containing Pre-tax and Post-tax money" or "Unusual Situations in Traditional IRAs". I definitely think the word "Non-deductible" is the biggest problem, yet know that is what users will google to find the wiki page. So we should be sure the title has a "hidden" reference to the "Non-deductible IRA" so folks can find it easily. LadyGeek can help with this. I will have her chime in about this.

The title is very important as it is what will drive the content and the reader's expectation of what to find there.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Mon Jan 20, 2020 5:27 pm

celia wrote:
Mon Jan 20, 2020 5:12 pm
fyre4ce wrote:
Mon Jan 20, 2020 12:16 pm
I'm definitely with you on correct terminology. Others have pointed out that the title could be misleading. If we keep the article, I would lean toward a change in title.
I propose the title "Traditional IRAs containing Pre-tax and Post-tax money" or "Unusual Situations in Traditional IRAs". I definitely think the word "Non-deductible" is the biggest problem, yet know that is what users will google to find the wiki page. So we should be sure the title has a "hidden" reference to the "Non-deductible IRA" so folks can find it easily. LadyGeek can help with this. I will have her chime in about this.

The title is very important as it is what will drive the content and the reader's expectation of what to find there.
How about "After-tax investment in a Traditional IRA"? I see what you're saying about growth being pre-tax, but I don't think "After-tax..." implies otherwise.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by LadyGeek » Mon Jan 20, 2020 8:55 pm

celia wrote:
Mon Jan 20, 2020 5:12 pm
fyre4ce wrote:
Mon Jan 20, 2020 12:16 pm
I'm definitely with you on correct terminology. Others have pointed out that the title could be misleading. If we keep the article, I would lean toward a change in title.
I propose the title "Traditional IRAs containing Pre-tax and Post-tax money" or "Unusual Situations in Traditional IRAs". I definitely think the word "Non-deductible" is the biggest problem, yet know that is what users will google to find the wiki page. So we should be sure the title has a "hidden" reference to the "Non-deductible IRA" so folks can find it easily. LadyGeek can help with this. I will have her chime in about this.

The title is very important as it is what will drive the content and the reader's expectation of what to find there.
Chiming in. The wiki can handle this as a "redirect" - we do this all the time. For example, typing "IRA" in the search box is automatically redirected to Traditional IRA.

What would readers normally type in the search box to find the article?

I think the proposed titles "Traditional IRAs containing Pre-tax and Post-tax money" or "Unusual Situations in Traditional IRAs" would be confusing for new investors.

Modifying what fyre4ce suggests, how about "After-tax Traditional IRA"? We also have After-tax 401(k), so it fits. Would that work (as a redirect)?
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

TravelGeek
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Re: Proposed update to Non-Deductible IRA wiki article

Post by TravelGeek » Mon Jan 20, 2020 9:33 pm

Thank you, OP, for working on this article. I will be reviewing it with personal interest because I have the need to clean up such a beast dating back to when I was young and stupid(er). :oops:
celia wrote:
Mon Jan 20, 2020 5:12 pm

The title is very important as it is what will drive the content and the reader's expectation of what to find there.
IRS form 8606 is titled “Nondeductible IRAs” and refers repeatedly to “nondeductible contributions to a traditional IRA”.

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fyre4ce
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Re: Proposed update to Non-Deductible IRA wiki article

Post by fyre4ce » Mon Jan 20, 2020 11:00 pm

TravelGeek wrote:
Mon Jan 20, 2020 9:33 pm
Thank you, OP, for working on this article. I will be reviewing it with personal interest because I have the need to clean up such a beast dating back to when I was young and stupid(er). :oops:
celia wrote:
Mon Jan 20, 2020 5:12 pm

The title is very important as it is what will drive the content and the reader's expectation of what to find there.
IRS form 8606 is titled “Nondeductible IRAs” and refers repeatedly to “nondeductible contributions to a traditional IRA”.
This is a really good point. I think we should be consistent with IRS terminology, even if that terminology is a little misleading. "Nondeductible Traditional IRAs" actually works pretty well in this context, but "Nondeductible contributions to a Traditional IRA" is clear and also longer.

I should point out that, title aside, I did try to explain this concept much more clearly in my revision, and I see that as an improvement.

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Re: Proposed update to Non-Deductible IRA wiki article

Post by celia » Tue Jan 21, 2020 2:40 am

LadyGeek wrote:
Mon Jan 20, 2020 8:55 pm
Modifying what fyre4ce suggests, how about "After-tax Traditional IRA"? We also have After-tax 401(k), so it fits. Would that work (as a redirect)?
The problem with that, as with "Non-deductible IRA", is that it sounds like that is another type of account:
Roth IRA
Traditional IRA
SEP IRA
Inherited IRA
Inherited Roth IRA
Non-deductible IRA
After-tax Traditional IRA
etc.

The last two do not exist in the same way the others do (ie, there is no form to open that kind of account). They are just verbal shortcuts referencing a situation, rather than a type of account. I know I'm being literal here, but I think newbies would easily think that is another type of account.



How about "Contributions to a Traditional IRA"?

"In most cases, contributions that are made to a Traditional IRA are tax-deductible with the understanding the taxes are to be deferred until withdrawals are made. But sometimes, those with high incomes, who are not eligible to deduct their contribution on their taxes, choose to still make a (non-deductible) contribution. One reason they might do that is to take advantage of the Backdoor Roth process, which enables them to convert the contribution soon after to a Roth IRA. But some people decide to make a non-deductible contribution and NOT convert because the pro rata rule would apply to them...."

LadyGeek, I see what you mean about the parallel with the 401K, but that is a unique situation, because there are legally 3 distinct categories that apply only to the 401K:

[Traditional] 401Ks (contributions are deductible and the taxes will be paid upon withdrawal),
Roth 401Ks (contributions are taxed and they and the growth are later withdrawn tax-free), and
After-tax 401Ks (contributions are taxed, but the growth is taxed at withdrawal) .

IRAs don't have the three-way distinction, although they have deductible, non-deductible, remaining basis (ie, remaining non-deductible).
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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celia
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Re: Proposed update to Non-Deductible IRA wiki article

Post by celia » Tue Jan 21, 2020 2:53 am

TravelGeek wrote:
Mon Jan 20, 2020 9:33 pm
celia wrote:
Mon Jan 20, 2020 5:12 pm
The title is very important as it is what will drive the content and the reader's expectation of what to find there.
IRS form 8606 is titled “Nondeductible IRAs” and refers repeatedly to “nondeductible contributions to a traditional IRA”.
TravelGeek, You got me there. But I think the IRS was as puzzled as we currently are by what to name the form as the 2-sided form really has 3 parts:
Part I is for nondeductible contributions and calculating the remaining basis, if any.
Part II is for Roth conversions.
Part III is for Roth withdrawals.

Knowing this, is “Nondeductible IRAs” a good name for the form? :? (I think not!)
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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