RE: Persyko questions

[Michael Jones <powderfinger99@yahoo.com>]

Mr. Reischauer, you continue to surprise me everyday!

<<<<
Equity considerations would argue that the $2,000 limit should be
raised for such workers.
>>>>

It is unfair that a worker could pay up to about $8400 in OASDI
taxes for which there is little benefit and still only be able to
contribute $2000 to an IRA which would offer much better retirement
benefit possibilities. It sounds like government entrapment to me.

At the very least, there should be no limit on after tax contributions.
They already got their income and FICA taxes on this money!

<<<<
1. Compliance could be a problem. Those with employer-sponsored
retirement plans are eligible for IRAs if they have incomes below
$41,000 for individuals and $61,000 for couples. The IRS would have
to have an easy way of identifying those eligible for the higher
contributions. This, of course, is already a problem but the
incentive to cheat is lower if the maximum contribution is $2,000.
>>>>

Because people might cheat, they shouldn't get the benefit?
How about structuring the rules so that compliance is easy.
Remember the benefit should be for the worker, not the bean counter
running the numbers.

<<<<
4. Lawmakers fear the erosion of employer-sponsored plans. If
individualized retirement saving vehicles become a reasonable
alternative, more employers may decide to scrap their employer-sponsored
plans. They could give their workers a pay raise in year one equal
to their contribution, but over time this employer contribution
could erode away. More would be left without retirement benefits.
>>>>

So, choice is NOT good for workers, even if IRA's could offer
better investing opportunities? IRA's have more flexibility in
investing options that 401K's.

<<<<
3. The budget costs might be high. This of course can't be true if
number 2 above is the case. But lawmakers probably suspect that it
would be politically difficult to set one maximum for those with
employer sponsored plans and another for those without such benefits.
>>>>

You lost me here. There already is a difference in limits for
both plans today!

Michael