Proposal would free up money in retirement plans

November 24, 1991|By Glenn Burkins | Glenn Burkins,Knight-Ridder News Service

Do you need money to buy a house, furniture or a major appliance? Some senators say you should be allowed to tap your tax-deferred retirement plans to pay for such purchases.

A bill to that effect was proposed Tuesday by Sen. Arlen Specter, R-Pa., and Sen. Pete V. Domenici, R-N.M. If approved, taxpayers would be permitted to withdraw up to $10,000 from their Individual Retirement Accounts (IRAs), 401(k) plans and Keogh plans as long as the money was used for one of the designated purposes. The senators said the plan may give the sluggish economy a shove without greatly increasing the budget deficit.

As the plan is currently written, penalties for early withdrawals would be waived, and income taxes on money withdrawn could be paid over four years.

Under current law, people who withdraw money from a tax-deferred retirement plan face a 10 percent penalty, and they must pay income tax on the money they withdraw in the year of withdrawal.

Under the proposal, only couples with income below $100,000 and individuals making less than $75,000 could participate.

* Here's a Christmas tip that even Scrooge would love: If you must buy a gift for your spouse, consider a brief case, calculator, fax machine or other business equipment. These toys can be a great career enhancer -- and they also may be tax deductible, says Jackson Hewitt Tax Service in Virginia Beach, Va.

* The cost of college keeps getting higher. Tuition at a four-year, public university is averaging about $5,488 a year for in-state students, and a private school is just under $13,000, according to the College Board.

While tuition rates shot up 20 percent a year in the early 1980s, experts say they will slow to a rate of 6 percent to 8 percent in the 1990s. That's still higher than the predicted rate of inflation -- and wage growth.

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