The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (August 4, 1997) -- Along with the much-discussed capital gains tax changes last week are some proposed changes that will make tax-deferred, even tax-free investing in Individual Retirement Accounts much more attractive in the future. Keep in mind that the full details are still sketchy and it won't be until the IRS releases its official and typically incomprehensible rules that we'll know precisely how the new regulations will work. But here are three of the proposed revisions:

First, the current 10% penalty on early withdrawals will be waived if the withdrawal is used for education or for the purchase of a first home. It's not clear whether that means the taxpayer's education or perhaps the education of a child.

Second, the Adjusted Gross Income thresholds for phasing out the deductible portion of IRA contributions (when the taxpayer's covered by a company pension plan) will begin to rise in 1998. For unmarried taxpayers, the level jumps $5,000, while the married level jumps $10,000. Through 2007, the thresholds will increase in stages until they are twice as high as today's levels.

And third, a new type of Super IRA is being formed. These IRAs will be for non-deductible contributions, that is, money you've already paid taxes on. But instead of simply deferring the taxes as in deductible IRAs, the withdrawals at retirement in these accounts will be entirely tax free if the account is open at least five years (with some limitations). The rotten aspect of this one, though, is that the total annual contribution, for either type of IRA, stays at the current level of $2,000 for a single taxpayer or $4,000 for married couples. I think they blew it in not expanding these limits, especially for the non-deductible IRAs.

Stay tuned. When the IRS releases its official regulations, I'll revisit them either here or in the Foolish Four column. Speaking of which, if you're wondering how the new 18-month holding period will affect the Dow Approaches, that's the subject of tonight's Foolish Four report.

Monthly Growth Screens
(Jan. 3 to present)
53.88%  Relative Strength  
27.05%  S&P 500 Index  
23.98%  Investing for Growth  
19.14%  Low Price/Sales  
17.50%  Unemotional Growth  
17.01%  YPEG Potential  
14.71%  EPS Plus RS  
-2.49%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
27.14%  Dow Jones Ind Avg  
22.61%  Dogs of the Dow  
22.17%  Beating the S&P  
17.63%  Dow Combo  
17.11%  Unemotional Value  
17.11%  Beating the Dow  
 6.91%  Foolish Four