One answer: Tax deferred growth

"jdadverb" <jdadverb[at]yahoo.com> wrote in message
news:1113353158.916247.296400[at]g14g2000cwa.googlegroups.com...
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Will Trice wrote:
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Yes, but with municipal bond yields so close to those of taxable bonds,
I doubt that the tax deferred returns of bonds in a non-deductible IRA
exceeds the tax-free returns of munis. One could do a little math
involving

(1) the yields of munis and taxables of comparable credit quality
(2) the time horizon
(3) the expected income tax rate at the time of IRA withdrawals

to determine what is best.

For REITS, unlike taxable bonds, there is no equivalent tax-free asset
class. They can make sense in a tax-deferred account.

Typically you're right. If you would invest your IRA money in equities,
you'd probably be better off in a taxable account (depending on how tax
efficient your portfolio is). But ordinary bonds would net more after
taxes in the IRA.

-Will

jdadverb wrote:
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My income this year is too high to qualify for either Roth contribution
or deductible contribution to Traditional IRA. The question is,
"Should I go ahead and contribute to Traditional IRA even though there
is no current year tax benefit?" My take is that it's a good idea if
I'm going to invest the Traditional IRA contribtion in bonds or bond
funds. If I invest in stocks for the long-term, then I'm sort of
wasting the tax deferral benefit of the Traditional IRA.

Thoughts?