Any ideas to invest around $4000 annually?

[BD85]

Starting in Nov ill be able to invest 4 dimes annually.I was looking at roth IRA's, seems safe way to invest and grow my investment. On the internet there were calculations that predicted if i invest 4000/yr for the next 40 yrs (im 20 so 40 yrs will take care of the 59 1/2 rule) with a avg growth rate of 10% the total will be a little over 2 million. Seems too good to be true. Also, will it be a problem if this money is made under the table? And once im in a high tax bracket is it wise to start a regular IRA?

I also think i should set up a savings account for emergencies so i dont pay taxes and penalities for tapping into the IRA's. Any suggestions to what invest the IRA in: stock, mutual funds, bank?

I hear that Bush wants to impliment a Life Savings Account in 06 and is even better than a roth. What ive heard is that max contribution is 5000, you dont need an income, no max income, and no penalities for taking it out (you can use it for school, house, retirement). Any down side to this LSA? Have you heard if it will pass or the chances of it passing?

Real estate is an idea as well but i dont have enough knowledge or bankroll yet, that will come along down the road.

I heard people suggest put money in mutual funds, but ive also heard im better off with an index fund. And then someone commented that it is unwise to invest in the index because for the next decade it is expected that the market will decline? I know i am only 20 and have yet to experience many successes and failures of life and that is why im asking you, who has, to help me step in the right direction.