Background:

1. I can not participate in Roth IRAs due the income limits.
2. I have a 401K available via my employer. If I was to create a personal IRA, I don't get the deduct my personal contribution (known as a "non-deductible IRA").
3. In 2010, the income limit to migrate TIRA (Traditional IRA) to Roth IRA is being removed.

Therefore I can do the following:

1. Contribute $4000 for 2007 into a non-deductible IRA as long as I do so by 4/15/2008.
2. Contribute $5000 (the max got bumped this year) each of 2008-2010. At this point I'll have $19,000 contributed into the ND IRA.
3. In 2010, convert the ND IRA into a Roth IRA.

Am I correct so far?

Roger

As the law currently stands, you are correct. Note that if you have gains on your IRA investments (meaning the total value exceeds $19,000) then you will have to pay tax on the profits at your normal tax rate (not the capital gains rate). But then you are home free! Unless.....

1) Congress changes the law between now and 2010 regarding IRA conversions. Assuming you are not very close to retirement age that won't be so bad - you will still have years of tax-free compounding ahead of you before you have to start taking taxable minimum withdrawals. I think this is a pretty likely possibility.

 2) You succeed with you conversion but some time in the future Congress decides to change the rules on Roth IRAs. If they don't change the current Medicare and Social Security systems they will be looking everywhere for more taxes. But I judge this to be an extremely low probability scenario.