IRA question I should know the answer to...

[y4m]

We max out 401(k) contributions. In the past, we've also done a $5000 max IRA contribution and then immediately converted that to Roth (back door Roth). This year that's no longer a path we want to take because I have a rollover IRA that would complicate. We also have a taxable investment account.

When I could convert that money to a Roth the IRA made sense. But now that the backdoor Roth is off the table, Should we just continue investing in the taxable account, or is there a (tax or other) advantage to diverting some of that money to a max traditional IRA contribution?

[bexporter]

The only advantage I can see is that you'll have more in retirement accounts, but that's also a drawback since it can't be taken out until you're a certain age. If you're not going to convert to a Roth, I think you should just put the money in normal taxable investment accounts.

[v]

The advantage of having it in an IRA rather than a normal investment account is that you can reinvest over time without paying capital gains taxes along the way.

[bexporter]

I knew someone would come up with an advantage I hadn't thought of!

[Poppy]

I agree, you can roll the IRA into 401k. Also, your H can still do backdoor.

It depends a lot on your investing style but if you're going to buy a stock index and hold it, it's probably advantageous to just invest in a taxable account since you'll only pay on the small distributed gains along the way, until you withdraw of course. But if you trade a lot or get a lot of dividends (eg bonds of high dividend stocks), the IRA could still be a little more tax efficient. It also depends on the laws and your retirement tax situation because your gains in the IRA will be taxed as income when withdrawn whereas the gains in the taxable accounts will be taxed as cap gains for which the rate is (for now) lower.