From: utzoo!decvax!decwrl!amd70!eager Newsgroups: net.invest Title: Re: Money funds, IRAs Article-I.D.: amd70.1341 Posted: Thu Jan 27 11:30:15 1983 Received: Sat Jan 29 05:51:51 1983 References: avsdS.310 There are several very good reasons to place money in an IRA or Keogh plan: 1. The money placed in either plan is deducted from current income and thus defers tax payment until the distribution. This gives me a $300+ tax reduction for each $1000 placed in a plan. 2. Income from the plan is also tax defered. In a more conventional investment, interest is taxed, reducing the net return. For example, investing in a ten percent savings account gives a real return after taxes of less than seven percent. 3. Distributions after age 59 1/2 (not 55) do not have a penalty. Distributions before that have a 10% penalty which deductable from income tax (a real penalty of <7%). Funds may be withdrawn once a year for up to two months without any penalty. When the $300 per $1000 tax reduction earns 10% ($30), the actual penalty drops further. Not to say it is good choice to incur the penalty, since you have to pay taxes as well, but it ain't that bad. 4. The plans are intended to provide retirement income, not investment income. But they can be used in a wide range of applications. Through stock broker plans, the funds can be invested whereever you direct, without beating you to a pulp with paper gains which you don't have the real dollars to pay taxes on. A self administered plan (offered by Pacific Home Natl Bank, Mass., and others) offers even wider range of investment opportunities. Avoid investments which give tax loss (e.g., depreciation) credits -- a Keogh or IRA cannot use them. 5. They give a good buffer for hard times. If you are unemployed, or otherwise on a very much reduced income, the tax paid on the funds distributed may be minimal. Much better to pay 10% than 30% when you most need the money. -- Mike Eager AMD ~v [B[B