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A deductible IRA is pretty well a no-brainer as you can save considerable money over time. All your IRA contributions are will result in a portion becoming 100% tax deductible (hope that makes sense….or should I say cents), and if you like most Americans, you will qualify for a deductible IRA. A good example would be as follows: Annual contribution = $3,000 - Current age = 30 - Years until retirement = 35 - Age of retirement = 65 - Expected rate of return = 9.00% - Current tax rate = 25.00% - Retirement tax rate = 15.00% - Adjusted gross income = $40,000. Your IRA balance at retirement would be worth approximately $705,374 before income taxes. With a retirement income tax rate of 15.00%, this amount is $599,568 after taxes. An ordinary taxable account, after taxes, would be worth $314,461 at retirement. Total contributions by retirement will be $105,000. So you can see the advantage of a deductible IRA. You should be setting one up before the age of 30, and I recommend contributing the maximum amount.
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