Bush Proposals Would Encourage and Simplify Savings
February 4, 2003
President Bush has proposed three new tax-free savings accounts that would let individuals sock away up to $29,000 a year for retirement and general purposes. They would replace the current mish-mash of 401(k) and other retirement plans and radically simplify retirement bookkeeping, analysts say.
Limits to all three accounts would be indexed to inflation.
- Employer Retirement Savings Accounts, or ERSAs, would replace 401(k)s and 403(b) plans and allow tax-deductible contributions of up to $12,000 a year initially -- and would involve tax-deferred earnings and taxable withdrawals.
- Individuals could put up to $7,500 a year-- $15,000 for couples -- into Lifetime Savings Accounts, regardless of age or income, which could be withdrawn tax-free for any purpose, although contributions would not be tax deductible.
- With Retirement Savings Accounts, contributions of up to $7,500 a year could be made -- double that for couples -- and the funds could be withdrawn after age 58 without paying taxes.
- In addition, people ages 50 and up could kick in a yearly catch-up sum of $2,000 to the third account.
Source: Paul Katzeff and Jed Graham, "Bush Savings Proposal Would Let People Squirrel Away Up to $29,000 Every Year," Investor's Business Daily, February 4, 2003.
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