THE SALINA JOURNAL THURSDAY, MAY 3. 2001 A3 ;T CONGRESS House gives boost |o IRA, 401(k) limits Returns / Four sectors cited FROM PAGE A1 Approved legislation 'gradually would raise Contribution linriits jPyThe Associated Press 7" t WASHINGTON — The House Overwhelmingly passed legislation Wednesday to increase the ftmount of money Americans can put in IRAs and 401(k) ^lans and to give companies greater incentive to offer tradi- Itjonal pensions to workers. The lopsided 407-24 vote — a parity on a tax hill in a Congress narrowly divided between Republicans and Democrats — should send a strong message to the Senate, where a nearly identical bill died last year, sponsors said. President Bush has expressed support for t)ie approach but did not in- ;^ude retirement measures in lis package of tax cuts.' At an estimated cost of $52 billion over 10 years, the bill gradually would raise contribution limits for tax-deferred traditional and Roth individual retirement accounts from $2,000 to $5,000 by 2004 and for tax-deferred 401(k)-type plans from $10,500 to $15,000 by 2006. People age 50 and older would get special provisions raising their contribution limits more quickly. The legislation would not, however, change the income limits that prevent some middle-to-upper-income people from participating. Supporters said the bill would boost a U.S. savings rate now at the lowest level in 67 years and supplement' Social Security, which faces an uncertain financial future just as 76 million baby boomers begin to retire. "Social Security isn't enough. It's hard to live on," said Rep. Rob Portman, R-Ohio, the main sponsor along with Rep. Ben Cardin, D-Md. "People need to have increased savings." ' WItece The lun Ncvec Seti" Sundas^ In may Wkistbands Only 3:00 p.m.-6:00 p.m. Unlimited Play* ' B OO not include »rcmlc He started his career as a financial analyst 40 years ago and joined Waddell and Reed in 1971 as a senior analyst, covering the technology industries. Herrmann sees four stock sectors as areas of growth for investing: energy, health care, defense and financial services. • He noted the United States hasn't added significantly to its energy generating infrastructure for 20 years, and now the economy is running up against capacity "The only way you can increase capacity is you have to give a fair return on invested capital," Herrmann said. "In other words, we have to raise the level of profits of the energy industry or they're not going to invest." Health care companies should see rising profits because of America's aging population, he said. His enthusiasm for health care stocks is despite efforts in Washington to curb health care costs. "I think that in the long run, the demographics are just overwhelming," he said. "You spend seven to 10 times more in the last four years of your life than you've spent in your entire life on health care services. As we get older, it's inevitable that the industry is going to grow." Bush to boost defense Defense stocks benefit generally under Republican administrations, and the Bush administration promises to follow that trend, Herrmann said. Because there was under spending on defense for so long, he said, returns on capital were too low to keep the industry thriving. "The Department of Defense is changing the way they're compensating the defense giiys for the contracted stuff they're producing that will allow them to be a little more profitable. But the next move that's going to happen is we're going to ramp up the money we spend on defense." Lastly Herrmann sees financial services as a profit-making sector because of deregulation and worldwide consolidation among financial institutions, including banks and insurers. Money is a commodity "and the only way you survive in a commodity business is you've got to be a low-cost supplier." The only way of gaining efficiency is for banks ta get bigger, Herrmann said. Herrmann said many Waddell and Reed clients have stuck to their investing strategy despite market losses. The company's mutual fund share redemption rate — 7 percent — is one of the lowest in the industry He has low regard for a glut of TV financial news programs that he says contribute to rapid, undisciplined trading activity An example, Herrmann said, is CNBC's weekday morning stock program, "Squawkbox." "It's ESPN in a different format," he said. 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