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Subject:  Re: Is IRA appropriate for early retirement? Date:  1/16/1998  6:06 PM
Author:  jwilson Number:  1332 of 88520

I am a 20 year old college student. I plan to retire well before age 59
1/2 and I would like to know if an IRA could have any place in my
portfolio. The main question is "Is the benefit of having earnings
accumulate tax-deferred greater than the cost of the 10% penalty for
early withdrawal over say a 20 to 25 year period?".

By all means, it is to your advantage to do so. It only takes a year or two to come out ahead on the 10% penalty depending on your rate of return. This becomes an even better deal if one can discipline oneself to invest the tax savings gained with the IRA, and put it into a taxable mutual fund. You can then greatly increase the leverage of your decision to use an IRA. This is taxable, but only on the distributions of the fund; you get the price appreciation free until you sell.

Good luck in this foolish plan, it makes an old fool wish these vehicles had been available when he was your age.

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