Word: iras
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...IRA has unexpectedly become the most important new financial investment vehicle in decades. By giving consumers an incentive to save and invest, the IRA tax deferral has provided a huge influx of new business for banks, thrift institutions and Wall Street brokerage houses. The total amount put into IRAs as of April 15 will be about $240 billion; by 1990 that total is expected to reach $500 billion. Those figures include Keogh plans, an equivalent of the IRA designed for self-employed individuals...
This gargantuan nest egg has also created greater financial security for the citizens who take part in the program. More than 27 million households, or about one-third of the U.S. total, have started at least one IRA. George Solomon and Anne Wyndham, a pair of Santa Monica, Calif., actors with a two- year-old son, each plan to start an IRA because of their uncertain future income in show business. Says Silverio Califano, 42, an Eastern Airlines aircraft inspector in Miami, who contributes to his account every year: "As far as I'm concerned, I think IRAs...
...IRA flood started as a trickle in 1974, when the Government began permitting them for taxpayers who did not belong to a pension plan where they worked. But the flow of money into the accounts became a torrent in 1982, after Congress extended the program to virtually everyone. Under the current rules, working taxpayers may put as much as $2,000 a year into an IRA and deduct the contribution from gross income when filing their federal tax return. For those in the 50% bracket, it means an immediate saving of $1,000 in taxes for their $2,000 contribution...
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...