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Hello there,

On my quest to become Foolish, I've been thinking
about the Fed's 'Success Taxes' ...

Has this been discussed here with possible
approaches to Foolish 401K/IRA planning
with regards to minimizing/eliminating the
success tax?

For those of you not familiar with the tax,
it affects people in two ways:

1. It penalizes people who through the use
of tax favorable plans (such as a 401K)
accumulate wealth beyond what the
government thinks is reasonably required
for a comfortable retirement.

Under current legislation, withdrawls and
payments from all pension and retirement
accounts that exceed $160,000 per year
(this is the 1997 level indexed for inflation)
suffer a 15% excess-distribution tax.

2. The second way the law affects retirees
is the excess-accumulation tax where
it becomes effective when a retiree dies
with an account the government deems
'too much money'. Currently, it's
approximately $1.2 million for a 65-year
old and $1 million for a 75-year old.

Amounts over this will result in a 15%
tax hit. This only affects sigle people
as excess-accumulation tax can be
deferred if assets are transferred to a
surviving spouse.

Any comments?
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