In those cases, the IRS allows you to contribute to a traditional IRA, but NOT take a tax deduction for it.

You still get tax-deferred growth, but during retirement your earnings (interest and capital gains) will be taxed, but not the contribution amounts.

Did you know that Congress has enacted a new law to encourage everyone to convert their traditional IRAs (whether deducted or not) into ROTH IRAs during the year 2010.

High income earners ($99,000-$114,000) filing as a single in 2007 and ($156,000-$166,000) for joint tax returns cannot fully fund a ROTH IRA. Those with Modified Adjusted Incomes of more cannot fund a ROTH at all!

You may remember that with ROTH IRAs, there is no tax deduction --- but the flip side is that when you take out the money properly... you don't pay income taxes! But I encourage everyone that qualifies for a ROTH IRA to contribute to one -- especially the younger folks!

Also, workers who have a retirement plan available at work such as a 401(K), may be excluded from investing in a deductible IRA as well depending upon their income. For singles with income of Modified Adjusted Income of $52,000-$62,000 and joint filers with $83,000-$93,000 who have access to retirement plans at work face restrictions on the deductiblity of IRA contributions.

So what are these people supposed to do to better prepare for retirement?

They can (under most circumstances) invest in a non-deductible IRA. Congress recently made this planning option more attractive than ever due to new laws allowing you to convert these NON-DEDUCTIBLE IRAs into ROTH IRAs in 2010 - and do so regardless of your income.

Plus, Congress made the deal even sweeter for you. You don't even have to pay any income tax due on converting to a ROTH that year. In fact, the IRS will allow you to pay the income tax over two years (2011 and 2012). So you get a tax-free "loan" in 2010 (no extra tax due that year) and then have two years to pay the tax due for converting to a ROTH. Nice!

Then you have a ROTH IRA for which taxes will NOT be due when taking distributions during retirement. That is a very good thing!

So if your income disqualifies you from funding ROTH IRAs now, simply fund a traditional IRA (take the deduction now) or a fund a non-deductible one, depending upon your individual circumstances. If you are under age 50 you can contribute up to $4,000 in 2007. Those 50 or over can fund up to $5,000.

If you haven't funded a 2006 IRA yet -- even if you already filed your 2006 tax return, you can still do so. But only if it is prior to April 17 OR you have requested an extension. Simply file the IRS Form 1040X to amend your return to include the IRA deduction. (Ask you tax advisor about this).

So put as much money in these accounts as you can and then convert them into a ROTH IRA in 2010. That year will be here before you know it!

And it gets even better!

In 2010, even money in SEP IRAs and SIMPLE IRAs can be converted to ROTH IRAs. This is going to be a bonanza for the taxpayer in that they are paying taxes on IRA balances then in return for NO taxes on these funds (and their growth) during retirement.

For most people, the only money for retirement will be money that you sent ahead (and its growth). The more and earlier you send ahead (save), the better for YOU.