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*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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