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PAINEWEBBER EXPERT ANSWERS FIVE MOST FREQUENT QUESTIONS ABOUT IRAS

PAINEWEBBER EXPERT ANSWERS FIVE MOST FREQUENT QUESTIONS ABOUT IRAS
 NEW YORK, Feb. 4 /PRNewswire/ -- It's been five years since Tax Reform '86 changed the rules regarding the tax deductibility of individual retirement accounts (IRAs), and there still remain some questions in the minds of many investors. As the deadline for 1991 contributions rolls around -- April 15, 1992 -- many investors are still not sure if they should contribute to an IRA. To help alleviate some of that confusion, Margo Allen, PaineWebber senior vice president- retirement answers the five most frequently asked questions about IRAs:
 1. How do I know if I'm eligible for an IRA deduction? There's a good chance that you are. According to the Employee Benefits Research Institution, nearly 60 percent of all American workers are still eligible to take a full $2,000 deduction on an IRA contribution for tax- year 1991. (You must contribute by April 15, 1992.) And, another portion of the population still qualifies for a partial deduction. Here's how the rules apply.
 You are eligible to take a full deduction on your 1991 IRA contribution if:
 A. You are not covered by an employee-sponsored retirement plan.
 OR
 B. You are covered by a plan, but your adjusted gross income (AGI) is less than $40,000 for married couples filing jointly, or less than $25,000 for single taxpayers.
 Furthermore, if you're covered by a plan and filing jointly, you are eligible for a partial deduction if your AGI is between $40,000 and $50,000. The amount of your deduction decreases by $10 for every $50 you earn above $40,000; the deduction phases out completely after $50,000. For single taxpayers, the same guidelines apply, with partial deductions being allowed for AGI levels between $25,000 and $35,000.
 2. If I'm not eligible for a tax deduction, should I still contribute to an IRA?
 Yes. In these days of less generous company pension plans and continued uncertainty about Social Security, it's more important than ever to save money for your retirement. In fact the Treasury Department advises that the bulk of your retirement assets will have to come from personal savings, with Social Security estimated to account for only 20 percent of retirement income.
 An IRA still features one of the best ways to make your retirement savings work for you: long-term, tax-deferred compounding. Consider this: Assuming a 28 percent bracket, a $2,000 annual contribution to an IRA at a nine percent annual rate of return will outperform the same investment made in a taxable account by $113,860 after thirty years. Of course, IRA funds are taxable once you begin distribution, but by then you'll likely be in a lower tax bracket, especially if you're retired.
 3. Where should my IRA be invested?
 With interest rates at their lowest in decades, many IRA owners may be shortchanging their potential to accumulate funds for retirement. Why? Because many IRAs, particularly those held at banks, are invested in Certificates of Deposit (CDs), which only yield between four and five percent in today's low interest rate environment.
 A better strategy for many investors would be to consolidate their IRAs into a self-directed account at a full-service brokerage firm. With a self-directed IRA, you decide where to invest assets and can choose among a wide variety of investments -- including stocks, bonds, mutual funds and unit investment trusts -- to best meet your individual needs and maximize your investment earnings.
 4. Who can contribute to an IRA?
 Anyone with earned income may contribute up to $2,000 to an IRA: married persons with non-working spouses may contribute up to $2,250. Although not everyone's contributions will qualify for a tax deduction, all IRA contributions benefit from tax-deferred compounding.
 In addition, self-employed individuals and small business owners may elected to contribute to a special IRA, known as a SEP-IRA (Simplified Employee Pension IRA.) You should check with your investment executive and tax advisor to learn more about this option.
 5. Can I still contribute to an IRA this year?
 Yes. You have until April 15, 1992 to contribute to an IRA for tax-year 1991.
 -0- 2/4/92
 /CONTACT: Beverly T. Spano of PaineWebber, 201-902-6775/ CO: PaineWebber ST: New York IN: SU:


SM -- NYTFNS6 -- 6463 02/04/92 07:16 EST
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Date:Feb 4, 1992
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