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In Pixy's (David Braze's) recent Fool article, "What Data Do You Believe?", he finds sources that seem to refute a Wall Street Journal article snippet which says "fewer than 5% of 401(k) participants make the maximum
allowable contribution and only 4% of taxpayers contribute the annual maximum of $2,000 to an IRA."

He finds one statement that seems to support the WSJ: "Among single workers, only 5% of those eligible for a deductible IRA contribution actually contributed to an IRA in 1992."

The evidence he finds to apparently refute the WSJ article talks about what percentages of people "expected to contribute" to an IRA in the next year. He does some calculations based on how many people have an IRA and how many "expect to contribute" and ends up with figures that he claims represent how many people are "expected to contribute" to IRAs. He concludes that the IRA contribution percentage is actually closer to 15%.

I object to the subtle change of language here. People may expect to contribute to an IRA, but end up not doing so - perhaps the car transmission needs replacing just as they were about to write out their IRA check. Even though they may "expect to contribute", this does not mean I "expect them to contribute".

There may be a small problem with his adding expected contributors to Roth IRA ans expected contributors to conventional IRA's. Although the ICI figures imply these are independent and can be added, it depends on people stating their expectations clearly. If someone has both IRAs, I can easily see them saying they intend to contribute to both, if asked at different times, or if mistakenely believing that they can contribute to both. Hopefully, this is a small percentage of the total, but it would tend to skew the results to seem rosier than they actually are.

I will admit that some of the figures from the ICI that David has found do support his contention that the contributions are rosier than the WSJ paints, specifically, "One-fourth of all households owned a
traditional IRA. Of those, 37% contributed an average of $2,000 in 1998".

However, there are various ways of counting here that cloud the comparison. A "household" owning an IRA could represent a few "taxpayers", only one of whom owns an IRA. His conclusion that about 15% of *households* contribute the maximum to an IRA account does not necessarily conflict with the WSJ statement about *taxpayers*.

The ICI reports are also based on participants who "reported contributing the maximum amount allowed" to 401(k) plans. I contend that some people will report inaccurately, either because they misunderstood the rules (perhaps they are contributing the maximum amount for which their company provides some matching funds) or because they answer what they think they should be doing or intend to do in the future (but never do). If the WSJ article is based on some (regretfully unmentioned) source that gathers actual figures, it is possible that both reports are correct.

I appreciate David finding additional figures, and it surely is nice to actually have a source of figures, but I am not convinced that he has refuted the numbers given by the WSJ article.

ssmsgician (Stig Ward)
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