Subject: Bush Administration’s savings proposals in its recommendations for tax reform Comment: As the founder and President of PENSCO Trust Company, I want to join with the Savings Coalition of America to urge that the President’s Advisory Panel on Tax Reform include the Bush Administration’s savings proposals in its recommendations for tax reform. These proposals, the Lifetime Savings Accounts (LSA), Retirement Savings Accounts (RSA) and the Employer Retirement Savings Accounts (ERSA), simplify the current tax code and provide strong incentives for Americans to save. Americans should be free to invest their retirement savings in all assets permitted under the regulations regarding IRAs and similar retirement products. These new vehicles should not be restricted to certain investment vehicles like 403-Bs (annuities) and 529 plans or mutual funds. The fact that most Americans in 401-k plans were limited to making choices within a group of mutual funds or their employers' stock, and could not choose assets like real estate or private investments, contributed to the loss of over $1.7 trillion in retirement plan wealth. Fortunately, self-directed retirement plans provide Americans the flexibility to choose among all IRS permitted investments, allowing investors to truly diversify their investments. Such diversification provides an element of safety by incorporating asset classes such as real estate that do not move in tandem with other investment classes such as public stock. Real estate, for example, can serve as important hedge against sudden downturns in equities markets, protecting retirement savings. Given that 44% of Americans' net worth per capita is associated with real estate (DOL, 2001) and that 83% of the estimated 25 million small businesses are funded by private investors, strengthening the rules that permit Americans to use retirement dollars for these types of investments must be a priority for our elected leaders. Companies like PENSCO Trust have been tireless advocates and educators for allowing Americans to invest as permitted by law. Another issue we urge the Advisory Panel to judiciously consider is that one of the most significant barriers to the growth in Roth IRA savings has been restrictions on converting a traditional IRA to a Roth IRA. One must understand that when you withdraw funds from a deductible (traditional IRA), you must pay tax at your ordinary income tax rate. There is no income limit on such withdrawals. Therefore, it makes sense that there should be no income limit on the conversion of funds in a traditional IRA to a Roth IRA which also results in ordinary income tax on the amount converted. Yet, there currently is a limit of $100,000 modified adjusted gross income, on a single or married basis. Married couples filing separately are prohibited from converting. This clearly doesn't make any sense and we would support efforts by the Administration and Congress to change these rules. On behalf of PENSCO Trust and the thousand of investors for whom we act as custodian, we urge the President’s Advisory Panel on Tax Reform to include the Bush Administration’s savings proposals in its recommendations for tax reform. We remain committed to being a strong voice for individual choice, flexibility, and control for individual retirement investments for all Americans. Tom Anderson President and CEO PENSCO Trust Company T 415.274.5600 ext. 5608 F 415.956.3016 www.PENSCOTrust.com Mailing address: PO Box 26903 San Francisco, CA 94126-6903 Overnight Address: 450 Sansome Street, 14th Floor San Francisco, CA 94111-3306 |