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Individual Retirement Accounts and Preretirement Savings Goals

Elizabeth C. Bogan and Thomas R. Bogan
Financial Analysts Journal
Vol. 38, No. 6 (Nov. - Dec., 1982), pp. 45-47
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4478595
Page Count: 3
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Individual Retirement Accounts and Preretirement Savings Goals
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Abstract

Elizabeth C. Bogan and Thomas R. Bogan Many people think that Individual Retirement Accounts cannot compete with alternative savings methods if the investor plans to withdraw the funds before age 59½, incurring the associated tax penalties. In truth, the IRA account may be more than competitive even over very short investment horizons. Given a 13 per cent interest rate and a 50 per cent tax bracket, for example, the IRA return (with the penalty for early withdrawal taken into account) will exceed the return available from an alternative investment in less than four years.

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