I disagree with the advice regarding contributing to a non-deductible IRA.
The cons of a non-deductible IRA:
1) You tie your money up for a long time.
2) You subject yourself to regular income tax rates when you withdraw the money.
3) Complex accounting to track your basis
The _only_ pro that I can think of
1) Tax deferral on earnings.
Keep in mind that in a taxable account your funds receive beneficial tax treatment (lower capital gains and dividend rates). By putting your money in a tax efficient fund, you can minimize any capital gains tax until you need the money.
By putting the money in a non-deductible IRA, those capital gains and dividends will be taxed at the full income tax rate.
miller posted about this topic: http://www.mypocketchange.com/2007/02/12/are-non-deductible-traditional-iras-worth-it/
. From his analysis, it appears to me that there is virtually no benefit to the non-deductible IRA, but having your money tied up has big drawbacks.
My recommendation (and what my wife and I have done) is simply open a regular taxable account at Vanguard, and invest in index funds. It's a simple investment, the money is accessible without penalty if you need it (for example, if you decide to buy a house).
There have been numerous articles about contributing to a non-deductible IRA and rolling that over to a Roth in 2010. This is a great idea *IF IT WORKS*. The new congress has made substantial rumblings about closing this and other loopholes. So it's *quite possible*, maybe even likely, that you'll wind up stuck with $16k in a non-deductible IRA, with its terrible tax treatment, and no way to get at the money.