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1. IRA is not an option as a tax saving benefit for us because of the tax bracket

I don't believe there are Traditional IRA restrictions based on income unless you are eligible for a plan at work (401K). Even so, you can always contribute after-tax money to a Traditional IRA for tax deferral. If you earn less than $150,000 you can contribute to a Roth IRA for tax free growth.

2. I should start investing in a index fund.

This is a very tax efficient option for accounts outside of tax shelters.

3. Does an Educational IRA make sense?

The limit is currently $500 per year, but legislation is likely to change that starting next year. The Senate's latest version of the tax bill increases that to $2,000. I believe the bill also removes the restrictions on making contributions to both a Coverdell Education Savings Account (Ed. IRA's are being renamed) and a state sponsored 529 plan in the same year. 529 plans are a great option as well. You don't have control over how the money is invested, but there is no cap on annual contributions.
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