I was with you until you mentioned you don't use IRAs. Tax advantage is important!
An IRA is not necessarily tax advantageous because gains are taxed as income when withdrawn, which is higher than capital gains. The choice to use IRAs is not straightforward. It's also hard to plan for any of this because tax rates can and do change. Capital gains and income tax rates may change, so I generally prefer to pay taxes earlier than later where possible.
I have generally found it more financially rewarding to focus my time on increasing income rather than on finagling my finances to save money. Same reason I don’t own a credit card just to get the cash back or other incentives.
Diverting some of your income into a tax-deferred investment account will not significantly affect your ability to focus on increasing income.
They're not mutually exclusive.
My approach largely resembles yours, but there's no effective difference between increasing income and reducing how much of it is taken from you in the form of taxes. If your priority is to increase your income, deciding to throw some of it into a tax-deferred investment account can be seen as a very efficient use of your time spent increasing your income.
All income from IRAs are taxed, principle and gains. A traditional IRA has gains taxed as income, which is higher then long-term capital gains on ETFs. Assuming tax rates don’t change, a traditional IRA will cost more taxes if the withdrawal and contribution taxable income is over roughly 40k, correct me if I’m wrong. That’s assuming income tax isn’t higher in the future, which is quite a gamble as historically income tax has been going up, and historically there’s just been more and more taxes.
Don’t forget that deductions for contributions don’t matter, because you will pay income tax on that principle when you withdraw. If tax rates increase, the tax cost of deferring could be even worse. It really depends on if you’re going to be earning income when you withdraw and how much is going to be withdrawn. It’s complicated and practically impossible to estimate total final tax obligations at retirement. IRAs are not a cut and dry “just put money in an IRA” decision.
Another problem with IRAs is the lockup. If you withdraw before retirement there’s a hefty 10% penalty unless it’s for a mortgage or health insurance.
I don't get why you're assuming you'll have to withdraw the money prematurely and incur the penalty. That's a rather pessimistic attitude, and it's not like you'd be putting all of your investment funds down this path.
The idea with tax deferral was that when you retire, your fixed withdrawal income will have a lower income tax rate than when you contributed, but as capital gains and income tax are now, that isn’t necessarily true depending on your contribution and withdrawal income.
Roth IRA was then created as a response to the well founded concern that income taxes will rise negating any tax advantage to deferral, but Roth wasn’t able to pass the legislation without severe compromises like contribution limits, and gains taxes as income on withdrawal.
But in the mean time, which can be a very long time, you're free to invest those deferred tax dollars. That can add up to a significant amount, over a large number of years.
It's not something to trivially dismiss.
I'm not a registered tax advisor, so this is not tax advice, but my impression is that you can take money out of a Roth IRA whenever you want, as long as you don't take more than you put in; the profits/returns are tax advantaged, but the original money is after-tax.
The reason why people will argue this is a bad thing to do is because you can only put so much money in per year, like $6,000 currently, and if you take money out, that doesn't add to the contribution limit.
I don’t see how a Roth IRA is really any different than keeping money in a traditional savings account, besides the withdrawal rules.
To first order, if tax rates don't change, and your investment return is the same, then I believe that you end up paying the same with a Roth IRA as a non-Roth IRA, which in turn is significantly less than a taxable account.
But Roths do have some other incidental advantages like I think you don't have a RMD. And if you have uneven income, you can do (partial) Roth conversions whenever your income is low. Which also gets around the contribution limit.