THE PUBLIC MIND: URGE LEGISLATORS TO PASS IRA MEASURE

To the Editor:

The Senate Finance Committee recently approved a broad tax bill containing provisions that would restore the full deduction for annual Individual Retirement Account (IRA) contributions, currently as much as $2,000, to 92 percent of Americans.

Support for this bill could be critical to the financial future of all American citizens who ever intend to retire. The reason is that Social Security and employer-sponsored retirement plans are simply not enough to maintain an individual's standard of living during retirement.

Specifically, it has been estimated that Social Security and employer-sponsored retirement plans provide 38 percent and 14 percent, respectively, of an individual's retirement income. A full 48 percent must come from personal savings!

And the outlook for the future doesn't look bright. As the population ages and life expectancies increase, more retirees are receiving Social Security benefits and fewer workers are contributing. In 1945, for example, the contributions of 42 workers supported every Social Security recipient. Today, the ratio is 3.4 to 1, and by 2030, it's expected to fall to 1.9 to 1.

Unfortunately, as the ratios have dwindled, retirement saving among individuals has not increased. The 1980s were the heyday of retirement saving as the tax deductibility of IRA contributions ~purred contributions. From the introduction of IRAs in 1982, assets in these accounts grew from $52.4 billion to more than $333 billion, and were held by more than 40 million Americans. Contributions in 1986 alone totaled $40 billion.

However, IRAs fell out of favor with Americans after the Tax Reform Act of 1986, which eliminated the deductions for many Americans. In 1987, the proportion of individuals contributing to IRAs dropped by 50 percent. In 1990, only 6 percent of Americans made deductible contributions to IRAs.

The legislation that the Senate Finance Committee has approved would increase the compensation cap on IRAs so that about 92 percent of taxpayers would be eligible for a tax deduction. In addition, the new provisions would allow tax-free withdrawals from an IRA after five years instead of an up-front deduction. The bill would further allow penalty-free early withdrawals from any IRA for college tuition, major medical expenses, first homes and the expenses of long-term unemployment.

If you would like to see fully tax-deductible IRA contributions reinstated for 92 percent of taxpayers, please call or write to your legislators today.

~Donna J. Domian

Cape Girardeau