[Shoe]

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Okay, I'm doing my taxes for '05 and I am trying to understand the logic behind an IRA. Why would I want to put 40k (I think the maximum is) into an IRA?

Sure, I don't have to pay taxes on it now, but I will when I withdraw it, correct? So what's the point? I either invest it on my own, pay taxes on the principal now, and pay taxes on the interest as I go along or I pay all the tax later (but I can't touch the money for almost 40 years).

I can't see why anyone would want to do this unless their company was matching contributions. As a self-employed person, I don't see the point.

Try to convince me otherwise?

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With a traditional IRA, the main advantage for some like you (that seems to make a lot of money), is that if you are in the highest tax bracket today, you can invest to get maximum tax savings today, and then when you retire, or if your income drops significantly when your older, you can withdraw from the IRA at a reduced tax rate.

For example -- when you invest now you save 35% on taxes. When you make withdrawals when your older you might only have to pay 20% tax on your withdrawals -- plus the money grows tax free until you make a withdrawal. (i'm not sure on what the tax brackets are -- the numbers i used are just an example).