From Ray's response:<< And the people who qualify *can* afford to do it. It just takes some financial discipline. I doubt that you'd tell me that a family earning $40k (the *beginning* of the nondeductible phase-out range for 1997!) can't afford $2k for an IRA. Yes, that's exactly what I'm telling you. I think the data gathered by the US government bear me out. Back-of-the-envelope estimates: $40,000 annual income, family of four. Fed tax= $4,500 ($10,000 std deduction) State = $1,200 (flat 4% of AGI) FICA = $3,000 (7.5% of $40,000) Total taxes = $8,700 Housing $12,000 (est $1000 per month) food $5,200 ($100 per week, $25 per person per week) utilites $2,400 ($200 per month, gas, electic, phone) clothing $2000 ($500 per person per year) car $4,800 ($400 per month, payments & insurance) Total major expenses: $26,400 Left over cash, $4,900 ($40,000 - 8,700 - 26,400) Minor & misc expenses can easily consume that remaining $4,900--I didn't account for any credit card payments or any other loan payments, or any other savings (such as saving for college expenses for the kids).>>If your add insurance to your example, your example will make it clearer that it is hard to contribute $2k with a family income of $40,000. Where I work, family health insurance will cost $250/month or $3000/year. Your could gamble and go uninsured, but I wouldn't gamble on it.And don't forget life insurance. You need some for both of you even if your spouse doesn't work. The non-working spouse needs insurance because who will take care of the kids while you are working if he/she dies. Life insurance should set a family back $30-$50 per month.In the end, not much left over for regular house and car maintenance, birthdays, Christmas, and other small costs.