Can someone help me decide which would be better to invest in? We make too much to contribute to a Roth, as well as not being able to deduct money put into a traditional IRA.
Say right now, I put 5k into a traditional IRA, and 5k into a normal brokerage account. I can't deduct the IRA contributions, so both amounts have been taxed at my tax rate of 24 percent before going in, so so far it's a wash.
I leave everything in SPY for 20 years and I'm ready to retire. The 5k in each has grown to 20k in each. I sell everything in my IRA, not paying capital gains, but paying income tax on the full withdrawal. Assuming a same tax rate as now, 24 percent, that's 20,000 times .76 equals a net of 15,200 from my traditional IRA. I then sell everything in my brokerage account. Going from 5k to 20k, that's 15k of long term gains, taxed at 15 percent. That leaves me with a net of 12,750, as well as the original 5k i put in, a total of 17,750.
It would seem that using a regular brokerage versus an IRA leaves me with more money? Is my logic flawed? What am I not seeing? Or is this correct when you cannot deduct money into a traditional IRA?
Edit: after reading advice I just submitted my traditional to Roth transfer.