`Catch-up' contributions to IRAs are valuable benefit for investors

Dollars & Sense

October 13, 2002|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE SUN

Last year, Congress passed a law that allows older workers to make "catch up" contributions to their retirement accounts. I am over 50 and wanted to put $12,000 into my 401(k) this year - the $11,000 maximum the law allows most employees, plus the $1,000 catch-up contribution. But I'm not being allowed to do so. My employer, a large international company, is telling me that no one can figure out how to implement the law. Did Congress and President Bush pass a meaningless law? Please help clarify this bizarre twist.

Bizarre? Not really. Remember, we're talking about tax law here.

There's always some confusion after a new tax law is passed as experts try to figure out how to implement it. In this case, some employers, indeed, are waiting for more government guidance about how to revise their plans to include the new catch-up provisions.

But to say that no one has figured it out is a stretch. About half of the 163 large employers surveyed by benefits consultant Hewitt Associates after the law was passed said they planned to have the catch-up provision in effect this summer. An additional 25 percent said they would do so by year's end.

Gather up a few of your over-50 compatriots and take these statistics to the head of your human resources department. This is a valuable benefit that won't cost employers all that much to implement, so you should lobby hard to get it.

My homeowners insurance company recently raised my deductible to $500 from $250. I've called a few other companies, but their quotes were too high because I've had three claims in the last four years - one from hail damage, two from water damage. The total amount for all the claims was less than $5,000. So I guess I'm stuck with my current insurer, but is there anything I can do to fight this higher deductible?

Fight it? You should be embracing your higher deductible. In fact, call them back and ask for one that's even higher - $1,000 would be good.

You shouldn't use your homeowners or auto insurance for damage you can easily cover yourself. That has never been more true than today, when insurers routinely drop customers who make numerous claims. (And, unfortunately, three claims count as numerous, especially when water damage is involved. Insurers are terrified of the growing mold problem, which has cost them plenty in several states.)

The purpose of most insurance is to protect you against devastating financial loss, the kind you can't recover from on your own. Paying for the small stuff is a smart way to reduce your insurance costs and, in your case, to keep your coverage in force.

Liz Pulliam Weston is a columnist for the Los Angeles Times, a Tribune Publishing newspaper.

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