Hi

I did my taxes, and it advises me that if I open an IRA (I never had one), I will save about $400 in taxes.

I am in the mid 40.

Is there any issues (need to pay penalty? - tax due is OK) in getting the money say I was in trouble - unemployed it or whatever?

Sciconf:

You are right at the edge between whether a traditional IRA is better than a Roth IRA. Either is a good investment for saving for your retirement.

The traditional IRA allows you to deduct up to $3,000 (for 2004) from your 2004 tax return, provided you open and fund the IRA before April 15th. You can still do it even if you have filed your return, then amend the 2004 return to claim the deduction. The money grows tax-deferred. You are allowed to draw on the IRA without penalty in the year you turn 59.5. You must begin drawing on the IRA when you turn 70.5. The money will be taxed at your current tax rate when you begin draw down the IRA.

The Roth IRA is funded with after-tax money, which means it has no effect on your 2004 tax return. Funding limit for 2004 is $3,000, and it grows tax-free. Though it is intended to be a retirement fund, after five years, you can begin to draw on the fund with virtually no chance of any penalties being assessed. You are never required to begin drawing down a Roth IRA, and you can pass it on to your heirs with no estate taxes being assessed.