Is my understanding of the different types of IRAs correct?

Question

I have been getting a bit confused by the variety of IRA accounts available to me and want to check that my understanding of each is correct, in a general sense (ignore complexities like 5 year rules, etc... and assume I am withdrawing at an age that does not incur penalty):

Roth IRA: Contributions are with post-tax dollars. Any money I withdraw after an appropriate time is completely tax free. Contributions + interest/gains... the whole thing is tax free at withdrawal
Traditional IRA: Contributions are with pre-tax dollars. Any money I withdraw at the appropriate time will be subject to income tax. Contributions + interest/gains... the whole thing is taxed as income
Nondeductible IRA: Contributions are post-tax dollars. At withdrawal I am only taxed on the interest/gains, and not on the contributions. This makes it essentially a similar but worse version of the Roth.

Is this all right?

D Stanley · Accepted Answer

You are correct. At face value a non-deductible IRA may seem like it's the same as a normal brokerage account, but the difference is that gains and dividends within a non-deductible IRA are not taxed until they are withdrawn (just like a deductible IRA), so when you buy and sell securities, there is no immediate tax consequence (meaning you don't have capital gains taxes), and the taxable portion of withdrawals is treated as ordinary (unearned) income.
However, since long-term capital gains tax rates are typically lower than income tax rates, the benefit of deferral may be outweighed by a higher tax rate in the end.

Is my understanding of the different types of IRAs correct?

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