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Author: frazierb CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19378  
Subject: Comment on What Data Do You Believe? article Date: 10/17/2000 1:59 PM
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I think the article as a whole provides a valid point, but I don't think the figures the author researched completely dispute the original "facts". On the 401K point, I think he is confusing the definitions of maximum contribution. There are two: the statute limit ($10,500) and individual plan limits (typically 15% of base earnings). Many people, myself included, are contributing the max they can to their company's plan. However, we don't make enough to contribute the statutory max of $10,500. The max I can contribute to my plan at my current salary is about $9,000. Therefore, I am contributing the max under the definition I think the ICI is using, but I am not contributing the max based on the legal limit. In a typical plan, a person would have to make $70,000 in order to contribute the statutory maximum. I strongly believe that much fewer than 27% of plan participants even make $70,000, much less contribute the statutory max. I can believe, however, that 27% of all plan participants, regardless of income, contribute the max that their plan allows. That could account for the different contribution percentages stated in the article. As for the IRA contributions, the "official" used the term taxpayers, while the ICI report used the term households. That is a significant difference. If you assume 2 taxpayers per household (it's probably more like 1.6 or 1.7), you would have to cut your calculation in half to make them comparable. Also, I prepare tax returns, and the 5% full IRA contribution figure seems to be more reflective of my middle-class clientele than 15%. I suspect the truth is somewhere in between. The number of clients I have that contribute the statutory limit to their 401K's is even less than the full IRA contributors. By the way, if any Congressmen are reading this, here is a very strong vote to raise the IRA contribution limit to $5,000 per year, and then index the limit annually for inflation. As for the marriage penalty, bring back the old Schedule W, which allowed a married couple to subtract 10% of the lower earning spouse's income from their total income. It's simple, it's fair, and it works.
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