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Show Si? THE VOICE OF BUSINESS J The promise of individual i retirement accounts I By Richard L. Lesher, Pres., Chamber of Commerce of the United States How would you like to turn a $20-per-week savings account into a $300-per-week income when you retire? If you find that hard to believe, I would like to call to your attention a little-publized feature of President Reagan's tax package--Individual Retirement Accounts (IRA). Under the landmark tax legislation just passed by Congress, all American workers, as of Jan. 1, 1982, will be entitled to open such ' accounts whether or not they are participants in an employer-sponsored pension plan. Here is how an IRA works. The worker may deposit up to $2,000 per year (2,250 for a year with a non-working spouse) in a special savings account set up with a bank, insurance company, mutual fund, savings and loan or stock brokerage firm. The deposits and the interest or other earnings on them are excused from tax until retirement age You may being withdrawals from the account when you reach age 59' . ; w ith-drawals ith-drawals before that age are subject to tax and a penalty. These new provisions put a self-sufficient self-sufficient retirement within reach of the average working American. Suppose Sup-pose you are now 35 years old and earn $24,000 a year for your family of four-the four-the national median income. If you deposit $1,000 into an IRA each year (that's less than $20 per week), and do so until you are age 65, you can deduct the annual deposit from the income you report each year for tax purposes. This provision in itself will reduce your yearly federal income tax burden by about $20, meaning that of the $20 per week you deposit, Uncle Sam is "contributing" $4.23 of that in the form of a lower tax bill. The long range benefits are even more impressive. If you save $1,000 a year for 30 years and earn, say, eight percent interest (a conservative figure now and for the foreseeable future), at age 65 you will have a retirement fund totalling $133,770-all of that generated from just $30,000 in deposits! If you decided to pay yourself an annuity from your account for a 15-year period, then you would have an income of just over $300 per week, which combined with Social Security and a company pension, makes for a comfortable, com-fortable, secure retirement. Naturaliv. these amounts would be greater if you are able to save more than $1,000 per year or earn a higher rate of interest or return. It is clear that an IRA could provide enormous financial benefits for the average family. But the promise of IRA's goes beyond the individual worker. When President Franklin Delano Roosevelt signed the Social Security Act into law on Aug. 14. 1935. he declared, "We have tried to frame a law that will give some measure of protection to the average citizen and to his family against poverty-ridden poverty-ridden old-age." The word "some" is important. Social Security was never meant to provide the total income needed for retirement. Most Americans c derstand this and agree with the a cept of Social Security as a retire:?, supplement. When asked in a rw. survey if the system, by itself, sir provide enough money to sljct retirees, respondents disagreed by e" 37 percent margin. Clearly, ci Americans believe that they, thr:x individual initiatives such as perst savings, investments and pens:; earned on the job, should bear i " primary responsibility for provi. a for retirement, Making all workers eligible for : t dividual Retirement Account re r-firms r-firms this important principle. Is:: -; suggesting that saving $20 a weekK ; easy task with the family boi already as tight as it is. but by dcc;; we would not only help ourselves.:. t we'd help each other too-because r '" new infusion of savings would zz more capital available for business: ' expand, modernize and create ar jobs. Turn a small weekly savings c: p, comfortable retirement icccri realize immediate benefits in their ;-. of reduced tax payments; contribii: capctal formation which will k .... increased productivity and prosper j!" and relieve the intense pressurtots SH-ial Security system to ptwi-!;, complete retirement ice::- something it was never meant tci- these are the opportunities wecar.st-' j. by opening Individual Retirer;' Accounts. Any w ay you look at it. t-winning t-winning proposition for your W' -ml ion. l' |