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  Funds may be withdrawn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
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