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Answer:
Dear
Steve,
The
Bush administration has made some major proposals
that would change the way we go about saving. Although
things are still in the negotiating stages, you are
wise to consider what might happen and what you should
be doing in terms of retirement planning.
Here's
a basic summary. For really in-depth coverage, go
to www.google.com,
type in "Bush tax proposals" and then click on "News."
This will lead you to a number of good articles. (Actually,
this a good strategy for keeping up-to-date on any
topic.)
Deductible
& Non-deductible IRAs...
These
two types of IRAs, which can be extremely confusing,
would be simplified and replaced by something called
the Retirement Savings Account (RSA). You would not
be able to make additional contributions after 2003.
$Tip:
If you have a non-deductible IRA, you might want
to wait and see what action Congress takes. In the
long run, you may be better off putting your money
into the new RSA.
Roth
IRAs...
These
too would be renamed Retirement Savings Accounts and
higher contribution limits would be put into effect.
The existing Roth IRA you have would remain unaffected
and be automatically converted into an RSA.
401(k)
Plans...
As
of 2004, these plans would be renamed Employer Retirement
Savings Accounts. Essentially they would remain the
same and you would be able to continue making after-tax
contributions.
What
you should do...
You
indicated that you already have a Roth IRA. You have
until your tax filing deadline (but not including
extensions) to make your contribution for 2002. I
suggest that you contribute the max -- even if the
Bush plan goes through and phases out IRAs, you would
be better off to have as plump an account as possible.
You won't lose any money or benefits. Your old Roth
would automatically become an RSA.
If
you have a 401(k) plan through your employer, continue
to contribute as much as you can. This is especially
important if your employer matches part of your contribution.
That's like found money and comes with no risk.
Thanks
for writing to us.
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