LETTERS From CAMP Rehoboth |
Thanks Senator Roth: Retirement Planning Just Got Easier for Everyone |
by Alex Yearley |
Yes, thank you for the new Roth IRAs that will help many to a more comfortable retirement. But more importantly and I hope intentionally, thank you for reopening the discussion of personally controlled retirement planning. I am not talking about talking retirement plans with a professional. I am talking about retirement planning as a topic of ordinary conversation. It has been a long time coming. I was a banker when the first IRAs were introduced with great fanfare. Anyone with earned income could open and deduct from income on his or her Form 1040 up to $2,000 annually. It is an understatement to say they were popular. Banks and brokerage houses added extra hours and sometimes staff to handle the volume of new accounts as the April 15 deadline approached. Everyone was trying to figure how much their accounts would be worth decades later when they retired. Banks realized they would probably retain these deposits for many years and gladly offered bonus rates to attract customers. Many agonized whether to invest on the stock market with their "retirement money". Can you imagine that conversation today? But it did not last. Uncle Sam put a halt to those conversations by limiting deductible IRAs to persons not covered by pension plans and to covered people who made less than $30,000. The market for IRAs evaporated and open conversations all but ceased. Most people moved on to new contributory retirement plans (401k and 403b) and the only time they thought about them was when the quarterly statement arrived. Those who could still open a deductible IRA seldom had the funds to do so. Only a savvy few continued on with non-deductible IRAs. Retirement planning rarely came up at the kitchen table. The new Roth IRA brings retirement planning back to Main Street. Again almost anyone with earned income can take advantage of the Roth IRA. Persons earning more than $90,000 have some restrictions, and those earning more than $110,000 are not eligible. For married couples its $150,000 and $160,000. It does not matter if you are covered by a company plan or not. The annual limit is still $2,000, but far less can be used to open one. The contribution is not deductible. The account must remain untouched for at least five years. There are lots of other bells and whistles. They will be covered next month. Once again the majority is being asked to consider doing something about their own retirement. A Roth IRA may well not be the best answer to your retirement plan. But at least it has succeeded in reopening the conversation. So ask questions, think about your situation, and talk it over with someone. Thank you, Senator Roth. Alex Yearley is manager of the Rehoboth Beach office of Community Pride Financial Advisors, L.L.C. located in the CAMP Courtyard, 39 Baltimore Avenue. He may be reached at (302) 227-2939. |
LETTERS From CAMP Rehoboth, Vol. 8, No. 1, February 6, 1998. |