San Angelo Standard-Times from San Angelo, Texas • 13

It's Your Business 3B Agriculture 5-7B Oil 8-9B SAN ANGELO STANDARD-TIMES Sunday March 15 IB IRAs remain wise investment Inside Business by Carol Daniel and Rex Henderson Advisers still recommend IRAs despite tax reform Value at maturity of $2000 invested annually at different interest rates Yield $600 thousand $500 thousand $400 thousand $300 thousand $200 thousand $100 thousand $ok 6 8 10 12 Interest rate By CAROL DANIEL Staff Writer Tax reform may threaten to baniah the Individual Retirement Account to obscurity five yean after it became a household word But IRAs are not yet ready to retire say San Angelo investment advisen Investment firms consider the IRA a wise investment for taxpayers even though the Tax Reform act of 19M cut away many of the tax deductions that made IRAs so attractive Under the old law a working person could contribute up to 82000 a year to an IRA and deduct that contribution from taxable income A person didn't have to pay taxes on either contributions to the IRA or the earnings that accumulated such as interest and dividends until funds are withdrawn In most cases that would not be before age 59V That law still stands for IRA contributions made through April 15 and credited to 1988 But for 1997 income a different story The new law limits the number of taxpayers who can take that 82000 deduction especially among taxpayers who participate in company-sponsored retirement plans Advisers suggest that many IRA-contributlng taxpayers who used IRAs mainly because of the tax deduction now should consider municipal bonds deferred annuities and series savings hauls But IRAs are still a good option for the conservative West Texas in vestor said Larry Skiles financial consultant with Rauscher Pierce Refines Inc told my clients even if not eligible to deduct 82000 unless they have a better place to keep it (money) for a long time and they know they're going to leave it Just put it in an IRA still a good deal still deferring taxes on profits just not as good as it Skiles said Rober Sidener assistant vice president of Eppler Guerin A Turner Inc said calculated a good idea to continue because the benefit over the long term is that compounding tax free and the up-front deduction is relatively The most popular IRA investments are government haul funds and lower-risk mutual funds because of the security and respectable yield they otter said Bill Holubec local managing executive of Integrated Resources Equity Corp a New York-based financial service company IRA investors have turned away from certificates of deposit because of the decline from double-digit to single-digit interest rates he said securities mutual funds) are good especially for people in their 30s who will be investing in their IRAs for a long time" Skiles said know there will always will be government bonds and they will always be competitively priced with respectable Another approach is a corporate bond mutual fund in which anticipated growth might be higher S-T graphic The table shows the difference two interest rate points can make in long-term IRA growth The table assumes compound Interest and a 82000 annual IRA contribution starting today Sidener said Or limited partnerships that are well diversified and income oriented (limited partnership) is projecting around 15 percent annual return over 12 years" Sidener said have been looking for higher returns gotten used to it but still concerned for Although tax reform curtailed use of limited partnerships as tax shelters for self-directed IRAs the limited partnership can serve as a hedge against inflation if it picks up as expected Sidener said A limited partnership in real estate would have to be an all-cash program there is no doubt at all there will be positive cash from the very Sidener said Holubec said the limited partnerships that will work as before for IRAs are all-cash real estate investments mortgage partnerships cable TV partnerships or equipment leasing Limited partnerships have the potential for higher returns than government securities The credit risk depends on underlying assets and soundness of the sponsor but can be reduced in many instancea through insurance or guaranteed provisions The long-term market risk is moderate Whether an investor chooses to be aggressive or conservative with IRA investments is an individual matter Sidener said who are younger can afford to be more aggressive because they have more years to average out the Is the liability crisis really loosening its grip in Texas? The debate over the cause and existence of a liability crisis boils on insurers and businessmen are crying out for tort reform while attorneys and groups gnash their teeth at the prospect Yet the Dallas Times Herald reported in February that low-risk business and other entities are obtaining premiums reductions Some high-risk groups and operations that posed pollution risks are having trouble finding liability insurance at rates like to pay the newspapa quoted a Dallas city risk managa as saying Texans fa Civil Justice an advocacy group based in Austin has found the Times Herald report and similar ones in the New York Times eminently quotable and has incorporated them in its anti-tort reform banner Marshall Ruling a partner in Fields Stewart Dolliver Insurance says the insurance crisis is far from ova although property Insurance prices are easing for some major commercial buildings Not even moderate-risk business a larger employers are feeling relief he says The liability crisis anything in Texas is deteriorating" he says and workers compensation rates not getting better getting The U8 Customs Service and the federal Drug Enforcement Agency go together naturally so only logical to wonder whether the DEA will station a few officers in San Angelo to work with drug investigations A public affairs officer for the DEA in Washington DC says only that looking at a lot of possibilities not yet made public where we're adding or bringing in new personnel" check back later The latest trend in investments advice is public seminars to educate selected audiences about their financial options Some firms have counseled at retirement centers others target the yuppia groups It's a handy way to expose potential clients to the wonders of financial wizardry in the hands of an investments advlsa Now BIB Holubec local executive for a New York-based financial service company is organising an this month for well just everybody in town A competitor wished aloud that he had thought of it Just a place where they can become more familiar (with alternative investments) and see if it fits in their portfolio and make a wiser decision on Holubec said Walton Foster the owner of seven West Texas radio stations Including two in San Angelo is clearly king of the hill in his business in this part of the country Now Foster can claim he has conquered even bigger hills Foster recently switched rating services from Arbitron to Birch Rating Service and found evidence his top-rated KIXY-FM is even more dominant that even he believed Birch Rating gave KIXY an incredible 519 percent share The Top-40 and rock format appeals to both teens and young adults Larry Gorlck Southwest Regional Managa in Dallas said can't say the highest in the nation because I don't have access to every little station But based on information I have I know of any that achieved any Foster noted "Arbitron also shows us numba one With a 28 share in the Arbitron rating system seven ahead of the nearest rated competition Which is But Foster still prefers Birch He said switched services because trusts research methods Could it also be that he Just likes the numbers better? Foster laughed and said raise no Questions answers about IRAs subject to the same phaseout if their income falls in the 825000 to 835000 range For couples filing Jointly who have an employer-sponsored retirement and an AGI of $50 000 or more no amount may be deducted Fa single filers the figure is 835000 or more If a taxpayer does not qssUfy for the IRA deduction Is it worth making the IRA contribution for only the tax-deferred growth beuefit? A The investa will need to weigh contributions more carefully against other investment opportunities Tax-deferral on earnings increases the rate of accumulation in the account And the IRA is effective as an enforced savings mechanism On the other hand the funds are tied up until retirement and cannot be tapped for other purposes without incurring a penalty Investors may want to weigh the advantage of tax-deferred build-up against alternatives such tax-exempt municipal bonds Fa most investors who can afford it the BA contribution will continue to be a good investment vehicle IRAs may be an ideal place to make growth investments Is a CD or money market feud the best bet fa an IRA? A Other investment alternatives may offer better returns When IRAs first became availabe to the majority of the public in 1982 CDs were paying as much as 15 percent interest Fa the conservative investor the product was very attractive Today CD rates are in the 8 to 7 percent range Conservative investors can find higher returns in US government securities a Answers to these questions about Individual Retirement Accounts were provided fly EF Hutton Co Inc and by San Angelo Investment advisers What Is the deadline lor making a 1991 IRA contribution? A The contribution can be made any time before April 15 The sooner the contribution is made the sooner the money begins earning a tax-deferred return Tax reform does not directly affect 1999 IRA contributions going to happen to 1997 IRA contributions? A Before tax reform IRA contributions were tax deductible on the current tax return Under the new law some investors will lose the deductibility advantage All wage earners can still take advantage of the second benefit tax-deferred accumulation of account earnings or growth Who still qualifies tor deductible IRAs? A Any wage-earner who is not covered by an employer-sponsored retirement plan can make tax-deductible contributions to an IRA Wage earners who are covered by an employer plan can make tax-deductible contributions if their adjusted gross income (AGI) falls below certain levels For married couples filing Jointly AGI must be below 80000 For single filers AGI must be below 825000 There is also an intermediate income range over which deductibility is phased out Couples filing Jointly with AGI between 80000 and 850000 will fall In the transitional range Deductibility will decrease 8200 for each 81000 of AGI above 80000 Single fliers will be corpaste bonds And those who are able to assume more risk may consider a number of equity investments such as direct purchase of stocks stock mutual fends a unit investments trusts Real estate investments through partnerships or trusts are also possibilities Caa aa fadlvldual have more thaa oae IRA? A Yes An individual can have IRAs with one two or more different custodians so long as the total contributions made in one year do not exceed the amount he is entitled to Fa example a single woman earning 839000 a year could put 8500 in an IRA with a bank 8500 in a mutual fund IRA and 81000 in a self-directed IRA with a brokerage company to buy stocks or bonds If the yield on the IRA Is not satisfactory can it be moved? A Flexibility is one of the advantages of an IRA It can be moved from one custodian to another so long as the proper transfer procedures are observed The investor can Instruct the custodian to send a check directly to the new custodian This can be done an unlimited number of times Or the investa can take possession of his fends This can be done only once a year and the exact amount withdrawn must be reinvested into the new IRA within 80 days What if the investor must take fends out of an IRA before retirement? A The investor can withdraw funds penalty-free as early as age 59V Withdrawals are taxed as ordinary income at the tax rate at the time of withdrawaL if withdrawn before that age they are taxed as ordinary income and subject to a 10-percent penalty Computer-aided car purchasing pleases Chevrolet Scries award Naw Sarvlea Chevrolet is pleased with a computer program that allows customers to pick out a car with their personal computers instead of a salesman ChevyTech includes all pricing and option information about 1987 Chevrolet cars and trucks on one 4-inch floppy disk Instead of visiting a showroom and going through the option books trying to decide on what do buy the Chevy Techdlskette will allow customers to do that at home Chevy supplies the disk fa free (except for 83 postage and handling) to anyone who asks including dealers The 1987 disks are available fa the IBM PC the Apple He and the Commodae94-f 1128 from ChevyTech PO Box 2054 Warren Mich 49090-2054 Ed Lechtzln a Chevy spokesman in Detroit said the software allows customers to select and delete options at the push of a button The software also will figure monthly payments Lechtzln said a survey of 400 people who requested a disk revealed 81 percent said they were more likely to purchase a Chevrolet car or truck since receiving the materials The software plays a Jassy version of Chevrolet's of advertising jingle followed by a menu of automobile model choices Once you have selected a model the software lists the standard equipment and the base price With the options menu you can select and delete options while you keep an eye on the running total on the retail price Once you have selected a good package and the approximate value of your trade-in the finance calculator figures the monthly payment If you are satisfied you can use your printer to make a hard copy that you can take to the deafer Although the customer still should dicker about price the computer-issued list can give the customer a feeling of confidence about the product Lechtsin said The deafer also may have a similar car in stock and may offer the customer a better deal he said The chart compares the return on an investment in tax-free municipal bonds paying 7 percent with a taxable investment returning 11 percent and an IRA earning 11 percent In the latter two cases the figures are after taxes are paid With I RAs the returns have accumulated on a tax-deferred basis Taxes are paid after the funds are withdrawn With taxable investment taxes are paid annually Investment comparison.