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URL:  http://boards.fool.com/my-challenge-ltlti-doubt-that-youd-tell-me-10141863.aspx

Subject:  Re: Honest IRA/Roth Comparisons Date:  3/30/1998  9:18 PM
Author:  tc001 Number:  2531 of 75839

*My challenge:
<<I doubt that you'd tell me that a family earning $40k (the *beginning* of the nondeductible phase-out range for 1997!) can't afford $2k for an IRA.

*Ray's response:
<Yes, that's exactly what I'm telling you. I think the data gathered by the US government bear me out.
Back-of-the-envelope estimates:
$40,000 annual income, family of four.
Fed tax= $4,500 ($10,000 std deduction)
FICA = $3,000 (7.5% of $40,000)>

*My counter:
It's hard to argue with estimates, but the numbers I can check are wrong.

Income = $40,000
Std. Deduction (married filing jointly) = $6900
Personal Exemption = 4 x 2650 = $10,600
Taxable Income = $40,000-6900-10,600 = $22,500
Tax = 3379

Your 'estimate' is $1121 (or 33.2%) too high. Also, FICA is 7.65%, which adds $60 to your estimate. And that's the trouble with estimates. The numbers that you could calculate came out wrong which leaves the numbers that are really estimates wide open to dispute.

I guess my bigger concern is that, if you are correct (which I don't believe), then the majority of families in this country could not afford to save for retirement (which I *really* don't believe!). The one point I was willing to concede was that the IRA contribution could not be afforded if the money was already going into a 401K to get the employer match. But your arguement precludes even that possibility. While I admit that it would be easier to live on double the national family income (about 32k), I think you draw much too bleak a picture for people with average earnings.

[By the way Ray, thanks for all the work on the DDA board. I think the opportunity cost of you spending time being wrong here is that I lose the chance for improved returns from your futher work into better Dow strategies ;^) Is that fair to me!?]
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