A CALL TO SIMPLIFY RETIREMENT SAVING

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

There's a lot of talk about retirement among workers -- and it's not necessarily by those about to retire.

Responsible Americans of all ages are beginning to face the fact that Social Security is not the answer to a carefree retirement. To ensure a comfortable future, pre-retirees need to put individual investments and employer-sponsored retirement plans to work today. Leading investment professionals have begun a campaign to persuade Congress to make it easier for workers to do so.

Matthew P. Fink, president of the Investment Company Institute, the national association of the mutual fund industry, served as a delegate to the National Summit on Retirement Savings, held recently in Washington, D.C. Speaking for the mutual fund industry, Fink urged Congress to take three steps to help Americans save more effectively for retirement:

-- Expand opportunities and strengthen incentives for individuals to save directly and through employer-sponsored plans.

-- Streamline certain cumbersome regulatory burdens that deter employers from offering retirement plans.

-- Keep the rules simple and easy to understand.

As an example of the way confusing regulations discourage saving, Fink noted what has resulted from IRA rule changes.

When Congress introduced universal tax deductions for IRAs in 1982, IRA contributions rose from less than $4 billion in 1980 to about $38 billion in 1986. Three quarters of all IRA contributions in 1986 were from families with annual incomes less than $50,000.

When Congress restricted the deductibility of IRA contributions in the Tax Reform Act of 1986, the level of IRA contributions fell sharply to $15 billion in 1987 and never recovered. In 1995, contributions totaled $8.4 billion.

"The 1986 changes introduced a level of complexity into an otherwise simple and successful program that was inconsistent with the critical goal of promoting long-term savings," Fink said.

According to Fink, the traditional IRA and the new Roth IRA are excellent ways for Americans to build assets for retirement, and making the tax-deductible IRA available to everyone could make these retirement accounts even more attractive.

Fink concludes that increasing the annual IRA contribution limit and removing complex income limits on IRA eligibility would encourage more saving. Further, he believes that allowing Education IRA rollovers into Roth IRAs and expanding Education IRA contribution amounts would provide further incentives.

Working Americans understand responsibility. Most also understand that it's their responsibility to prepare for retirement by treating Social Security not as their primary source of retirement income, but as a potential supplement to a retirement income they provide for themselves.

Fink makes the case that our government can help by simplifying retirement savings accounts. As he says, "It's one of the best investments the government can make."

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