My wife and I have been exploring the possibilities with the new IRA laws for 2002. Watch this:

A couple days ago, I filled out my 1040 on scratch paper just to see how much we would get back. Our refund turned out to be $1955.

Then we discussed starting an IRA. With a $1000 contribution to an account, I filled out another 1040, and our refund turned out to be $2490!

(Note: the deadline for contributing to an IRA is NOT Dec 31, it's Apr 15 of the following year. You actually have 15 1/2 months to add to your account for the year, not 12.)

Here's how it happened:

Because the contribution to an IRA reduced our income, our EIC increased.

Because of the new retirement account credit, we were disqualified from taking our normal "child tax credit". This increased our "additional child tax credit".

Both EIC and "additional child tax credit" are refundable, so the amounts actually added to our refund.

Result: We can take $1000 out of one account and put it into an IRA. When we get our refund, it will be $540 larger because of that investment.

(Of course, this works only for lower income brackets, and it helps if you have kids and file a joint return. Every situation will be different.)

It sound like a nice jig saw puzzle. I think our income bracket would be exempt.

How about the Roth IRA? Down the road, that's an even better deal.

Personally, I prefer Roth, but it's a matter of opinion whether you want to be taxed now or taxed later.

Both of them count toward the new qualified retirement credit, but the Roth will get you a slightly smaller benefit.

I haven't looked into IRA's in a few. Please correct me if I'm wrong. With the traditional IRA, don't you have to start taking distributions and pay capitol gains at 72? I don't think that applies to the Roth. I thought that you could pass on tax free your Roth account upon death also. You can't do that with a regular IRA.

I talked with one of the pharmicist at work. He does investments during the week. He advised me to go with Roth. He said that you save a little now or a lot later. I work part time, so my income isn't incredibly high. It did make a difference in my tax refund.

I went on the theory that the more I could invest now would be more money that would be in the market for later. After paying taxes, I can't invest the true limit.

Straighten me out here!