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Farmington bids 855-0474 By Appoinrment Only eN FOOTSTEPS PODIATRY CLINIC 13740 W. 9 Mile Next to Oak Park Post Office SPECIALIZING IN LASER THERAPY IN ADDITION TO THE TREATMENT OF • Bunions • Corns D Callouses O Ingrown Nails 0 Diabetic 0 Warts Foot Care D Pediatric ❑ Heel Pain Q Sports Foot Care Medicine Medicare and most insurance plans accepted as payment in full. DANIEL S. LAZAR, D.P.M. il 82 Friday, February 13, 1987 THE DETROIT JEWISH NEWS ■•■ ••BARRY J. WEISBERG The investment implications of The Tax Reform Act of 1986 have given investors good rea- son to re-evaluate the direction of their retirement planning. ' Perhaps the foremost question on the minds of most IRA (In- dividual Retirement Account) investors these days is: Will the role of an IRA under the new tax law change the way I plan for retirement? Taxpayers should take ad- vantage of an IRA for 1986. For many taxpayers 1986 may be the last year to enjoy the full tax deductions for an IRA con- tribution. The most significant tax changes involving IRAs don't take effect until the 1987 tax year. So, if confusion about tax reform's impact on the IRA was the only question in decid- ing whether you should make your 1986 contribution, don't delay any longer. You can de- duct your entire 1986 contribu- tion (up to the lesser of $2,000 or 100 percent of your earned income) and you have until April 15, 1987 to do so. The sooner you make contribution, however, the sooner your in- vestment earnings will grow, deferred from taxes. You will be able to deduct IRA contributions in 1987 and beyond.Beginning with the 1987 tax year, you will still be able to deduct your IRA contri- - bution, regardless of your in- come, if neither you nor your spouse is an "active partici- pant" in an employee- sponsored qualified retirement plan. But what exactly is an active participant? The general rule is that an employe is an active partici- pant if the individual is covered by a pension or profit- sharing plan. Among the categories of tax-qualified plans mentioned by the IRS as falling under this provision are profit-sharing plans, tax- sheltered annuity ar- rangements, 401(k) plans and simplified employee pension plans. This "active participant" area of restrictions on IRA de- ductibility is more difficult to comprehend because an em- ployee does not necessarily have to be fully or (even) partly vested in retirement benefits, make any contribution to the plan or work for the employer for a whole year to be consid- ■.■ 548-6633 Weisberg is a financial consultant with the Souhfield office of Shearson Lehman Brothers. ered an active participant. Due to the complex nature of these issues, you should consult your tax adviser on how the law applies to your individual situ- ation. However, even if you are an active participant in a retire- ment plan, you may still be able to deduct all or part of your annual IRA contribution. You can deduct your entire contribution (up to the lesser of $2,000 or 100 percent of your earned income) in future tax years if you: are single and have an adjusted gross income of less than $25,000; or, are married, file jointly, and have a combined income of less than $40,000. Deductibility however, is not permitted if you (or your spouse) is an active participant in a retirement plan and your adjusted gross income exceeds $35,000, when filing a single return, or exceed $50,000, when filing a joint return. Partial deductibility is per- mitted for active participants (and their spouses) in a retire- ment plan if their adjusted gross income falls between $25,000 and $35,000 on a single return or $40,000 and $50,000 on a joint return..In these instances, your IRA's de- ductibility is reduced by 10 percent for every $1,000 above the base amounts of $25,000 and $40,000, respectively. Make IRA contributions in future years even if they are not tax-deductible. Stop worry- ing about the loss of tax- deductibility for your future IRA contributions. These con- tributions will still accumulate earnings on a tax-deferred basis, which has always been the most important feature of IRAs from a retirement plan- ning perspective. Tax-deferred earnings is the cake— deductibility was just the ic- ing. The tax deferral feature that IRAs offer has never caught the investing public's fancy in the same way deductibility has, but the following example wil show the added earning power tax deferral can get you. Suppose that an investor in the 28 percent tax bracket puts aside $2,000 each year for re- tirement and earns 9 percent annually on the investments. In an IRA, where income and capital gains compound tax- deferred, the account will grow to about $112,000 after 20 years. That amount represents a gain that's nearly 40 percent higher than if the money were ( N