Page 89 - The Informed Fed--Hearn (edited 10.29.20)

a traditional IRA due to the contribution limit, so the post-tax Roth
contribution may be larger.
On estates large enough to be subject to estate taxes, a Roth IRA can
reduce estate taxes since tax dollars have already been subtracted. A
traditional IRA is valued at the pre-tax level for estate tax purposes.
Disadvantages: Funds that reside in a Roth IRA cannot be used as
collateral for a loan per current IRS rules and therefore cannot be used
for financial leveraging or a cash management tool for investment
purposes. Contributions to a Roth IRA are not tax deductible. By
contrast, contributions to a traditional IRA are tax deductible (within
income limits). Therefore, someone who contributes to a traditional IRA
instead of a Roth IRA gets an immediate tax savings equal to the amount
of the contribution multiplied by their marginal tax rate. Someone who
contributes to a Roth IRA does not realize this immediate tax reduction.
Also, by contrast, contributions to most employer sponsored retirement
plans (such as a TSP, 401(k), 403(b), SIMPLE IRA or SEP IRA) are tax
deductible with no income limits because they reduce a taxpayer’s
adjusted gross income.
Eligibility to contribute to a Roth IRA phases out at certain income
limits. By contrast, contributions to most tax-deductible employer
sponsored retirement plans have no income limit. Contributions to a
Roth IRA do not reduce a taxpayer’s Adjusted Gross Income (AGI). By
contrast, contributions to a traditional IRA, or most employer sponsored
retirement plans, reduce a taxpayer’s AGI. One of the key benefits of
reducing one’s AGI (aside from the obvious benefit of reducing taxable
income) is that a taxpayer who is close to the threshold income of
qualifying for some tax credits or tax deductions may be able to reduce
their AGI below the threshold. By reducing below the threshold, he or
she may become eligible to claim certain tax credits or tax deductions
that may otherwise be phased out at the higher AGI had the taxpayer
instead contributed to a Roth IRA. Likewise, the amount of those tax
credits or tax deductions may be increased as the taxpayer slides down

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