Word: iras
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Dates: during 1980-1989
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Besides enjoying the tax deferral, IRA savers can watch their investment compound over the years. If a 30-year-old worker makes a $2,000 annual contribution for 30 years to an IRA earning an average of 10%, the account will balloon to $468,580. Those who withdraw their money before age 59 1/2, however, must pay taxes on the amount taken out, as well as a 10% penalty, which can make IRAs an unwise investment for consumers who think they will need the cash on hand...
During the early 1980s, most IRA money poured into banks and savings and loan associations because interest rates were going into outer space. But one- year certificates of deposit, which earned a handsome 15% or more in 1981, now bring savers only 8% or so. Result: many consumers, suffering from single- digit shock, have started moving their IRA accounts to Wall Street in search of better yields. IRAs invested in stocks typically earned a 26% return last year. "We're clobbering the banks. It looks like the tables have turned," boasts Gary Strum, first vice president in charge of pension...
...surge of IRA money into stocks has become a self-perpetuating trend by helping keep the bull market going. Last week the Dow Jones industrial average closed at a record 1821.72, up 53.16 points for the week...
...banks and thrifts have launched a strenuous effort to keep the brokers from hijacking their customers. Many have teamed up with investment firms so they too can offer stock packages. More visibly, financial institutions are showering consumers with promotional giveaways and extending hours. Customers who open an IRA at North Carolina Federal Savings and Loan in Charlotte automatically enter a drawing for a free round-trip Piedmont Airlines ticket, which can be used on any of the routes the carrier flies, from Miami to San Francisco. New York City's Dollar Dry Dock Savings Bank is offering new IRA depositors...
...consumers lack the cash to start an IRA, some banks will lend it to them. Borrowing money to put in the bank sounds paradoxical, yet it makes sense for some people because the interest on the loan is tax deductible. New York City's Chemical Bank, which urges customers to think about an IRA "even if you don't have the money," calculates that a taxpayer in the 35% bracket would pay about $154 in interest on a $2,000 one-year loan but could recover $54 of that by deducting the payment on an itemized federal income tax return...