What is the advantage of a nondeductible IRA?

A nondeductible IRA is a retirement savings account to which you contribute after-tax dollars but that allows you to grow your money for retirement without paying taxes until gains are withdrawn.

Which IRA is best for doctors?

In retirement, tax-free income is the ideal way to take distributions, and a Roth IRA remains one of the best ways to get that benefit. However, high earners like physicians and dentists may feel locked out of some tax-free withdrawal options as their high income disqualifies them from opening Roth IRA accounts.

Should doctors have a Roth IRA?

Most physicians are generally not eligible to contribute directly to Roth IRAs because they earn too much. The IRS rules prohibit anyone earning over approximately $117k if you’re single, or $184,000 if you’re married, from contributing to a Roth.

Should I invest in IRA if not deductible?

While some IRA contributions might not be tax-deductible, there are other reasons to contribute to an IRA. Non-deductible contributions create a retirement tax diversification plan. A non-deductible IRA makes a Roth conversion less taxing. Contributing even if you can deduct means a faster buildup of retirement savings.

How do non-deductible contributions to an IRA affect the taxpayer’s basis in the IRA?

You won’t owe income tax on the nondeductible amount you contributed to the account, only the investment gains. Roth IRA contributions are made with after-tax dollars and withdrawals in retirement will not be subject to taxes.

What is the difference between a nondeductible IRA and a Roth IRA?

In both cases contributions are after-tax, but all future growth and withdrawals from a Roth IRA are tax-free, whereas the withdrawal of growth from a non-deductible Traditional IRA is taxable as income. A Roth IRA has an income limit for contribution, whereas a non-deductible Traditional IRA does not.

What is the best retirement plan for a doctor?

The Solo 401(k) Plan offers a doctor far more retirement, tax, and investment options than a Traditional IRA, SEP, or SIMPLE IRA. It can be a perfect retirement plan for any doctor or physician who operates his or her medical practice as a sole proprietor.

Do doctors have 401k or 403b?

Most physicians working as employees of large hospital groups will have the opportunity to invest in a 403b or 401k. Many physicians working for governments and tax-exempt organizations will have the opportunity to invest in a 457(b) plan instead.

What is the difference between a Roth IRA and a traditional IRA?

With a Roth IRA, you contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after age 59½. With a Traditional IRA, you contribute pre- or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.

Is backdoor Roth good for doctors?

It’s an ideal option for physicians who expect their income to rise as they advance in their careers. With a backdoor Roth IRA, you pay your tax contributions now (when your taxable income is likely to be lower), rather than pay them in the future (after your income increases).

Is a non-deductible IRA a traditional IRA?

A non-deductible IRA is a retirement plan you fund with after-tax dollars. You can’t deduct contributions from your income taxes as you would with a traditional IRA. However, your non-deductible contributions grow tax free.

Can anyone make a non-deductible IRA contribution?

Anyone with earned income can make a non-deductible (after tax) contribution to an IRA and benefit from tax-deferred growth.