If you're raking in the big bucks, it just might make sense to stash after-tax money into an IRA.
Putting money into an individual retirement account brings a bevy of benefits. Savers can put away up to $5,500 this year in a traditional IRA, plus $1,000 if they're 50 and over. Money in this account grows on a tax-deferred basis over time.
Here's the kicker: In 2018, workers with a modified adjusted gross income of up to $63,000 ($101,000 if married), can take a deduction on their income taxes up to the amount of their contribution limit.
If your income places you above the threshold for the deduction — or if you earn too much to make a Roth contribution for 2018 — a nondeductible IRA contribution with after-tax money may be worth considering.
"Many of our clients are phased out of making deductible contributions to an IRA or direct contributions to a Roth IRA," said Jane DeLashmutt O'Mara, portfolio manager with FBB Capital Partners in Easton, Maryland.
"For those who want to build a larger tax-deferred savings bucket, this is one way to do so," she said.
These are the upsides — and downsides — of stashing nondeductible contributions into an IRA.