Non-deductible IRA contributions

401(k) plan?

Q: Is there a reason to make a nondeductible contribution to an IRA?

A: There has always been a good reason to make nondeductible contributions to an IRA: The growth and income on such contributions are tax deferred. With new Roth IRA conversion rules beginning this year, there's an even more compelling reason: After making the non-deductible contribution, you can immediately convert (tax free) the amount to a Roth IRA, and future growth and income will be tax free (assuming there are only nondeductible contributions in the IRA).

Send your money management questions to Answers to our readers' questions were provided by Medical Economics consultant Barry Oliver, CPA, PFS, Thomas, Wirig, Doll & Co. Capital Performance Advisors, Walnut Creek, California.