BACK • 
Seize the Moment
The market is down, and you probably haven't done your IRA for this year, and in fact, there's a high probability that you haven't even done your IRA for last year. As you may be aware, you have, legally, up until the time you file your taxes for the year 2000 to make your contributions for last year-- many of you will probably wait until April 16th (since April 15th falls this year on a Sunday). We've said it before and we'll say it again, everyone can and should do an IRA. People often say to me "I thought I couldn't do an IRA because I have a plan at work, or because my income is too high." That's wrong. What you really mean is you can't deduct the contribution. But the deduction is by far the lesser benefit when compared to years and years of having the money grow tax-deferred away from Uncle Sam.
Your IRA money can really grow quickly. For example, if you are 40 and have at least 20 more years to work, at 6% compounded and tax-deferred, you'll have almost $78,000. At 10% your IRA account would grow to $126,000 and at 12% it would be more than $162,000. Obviously, the younger you are, the better it gets. If you're 25 and have 35 years of work left before you're 60, and contribute $2,000 every year, the 6% growth rate would mount to $236,241.73, at 10% will be equal to $596,253.61 and at 12% the money will have grown to $966,926.23. The point is that certainly IRAs are worth doing.
Don't forget about the Roth IRAs. They're never deductible, are tax-free, not deferred, for married couples earning less than $150,000. Obviously, if you qualify, tax-free at the end of the line is better than tax-deferred when you ultimately have to settle up with Uncle Sam.
By the way, the earlier you put the money away, the better off you are. I talked above about waiting until the last minute (April 15th or 16th) but that isn't the best idea. Over a 20-year period, a person who constantly waits until the last minute to put their $2,000 contribution in, and earns 10% on average for that period of time, will grow their money to $109,989. However, if the person had been the "early bird," and contributed in early January, the same amount of money over the same 20 years would have gown to $126,005. The reason? Because you're actually getting about 15 ½ months more of growth out of each $2,000 contribution by doing it immediately, rather than waiting until the following mid April.
Sticking with IRAs a bit longer, there has been a dramatic change in the rules covering IRA required minimum distributions. The rules also cover 403(b)s, 401(k)s and even 457 plans. For the most part, the rules have been simplified so that everyone can understand what is required. You should check with a CPA to get the final, concrete regulations, but at the bottom line, I repeat, the regulation is much simpler, much more flexible, and will benefit most people to a greater or lesser extent.
As we stated at the top of this space, if you're a long-term investor, and by definition, in vehicles like IRAs, 401(k)s or 403(b)s, you almost have to be a long-term investor, this is probably going to be wonderful time to invest. Prices are substantially off their highs of a year ago. Mine is the only business where when we "mark down" our product, people back away. In any other business when you cut prices by 10% or 20%, that is designed to stimulate traffic and sales. It is the complete opposite, unfortunately, in my business, but it really shouldn't be. If you think back to just a year ago, you probably would have been much more willing to make the contributions and join in on the hot game that was going on, but as we now see, stepping back a year, it was, at least over the short-term, the "wrong time." Well, my contention is that as it turned out, people were too optimistic a year ago and probably too pessimistic now, and over the long term and in retrospect, this period will have turned out to be once, again, a long-term buying opportunity.
(Tom Butenhoff is a First Vice President with J. E. Liss and Company, Inc.
in Milwaukee. The views are his, and not necessarily those of Liss
Financial Services or the Job Connection/Hiring
Network.)