No. of Recommendations: 5
Up until 1997 IRA's had a "success tax" of a 15% surcharge on annual distributions exceeding $160,000/year. The reasoning was that IRAs were designed to be retirement plans, not wealth transfer vehicles for the wealthy.

On the other hand, more red flags of danger should wave if Congress and President Clinton don't agree to repeal the so-called success tax this year. The 15% levy now applies to "excess" distributions from 401(k)s and IRAs (more than $160,000 a year). That extra wallop at the end alters all sorts of calculations, since it discourages accumulating wealth. But now, thanks to Sen. Phil Gramm (R-Texas), Congress is poised to repeal the tax. The Senate has passed Gramm's repeal provision, and insiders believe it has a strong chance of surviving the whole process. If the President signs a tax bill this year, the "success tax" likely will no longer be a peril for aggressive savers.


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