In 2014, you could take $5,500 per year and invest it in some investment vehicle such as a mutual fund and, for people with moderate incomes, deduct the entire $5,500 from taxes. (Individuals who earn relatively high incomes cannot take an initial tax deduction, but they still get all the other tax advantages described below.) If you are in the 28 percent tax bracket, the contribution really costs you only $3,960 since the tax deduction saves you $1,540 in tax.
