NU Online News Service, Feb. 3, 4:55 p.m. — Washington
President Bush’s fiscal year 2004 budget could lead to the creation of new tax-favored retirement products that compete with life insurance and annuities.
In addition, the president is renewing his call for permanent repeal of the estate tax and for providing an above-the-line deduction for the purchase of long-term care insurance.
The president is also calling for repeal of Section 809 of the tax code, but he is silent about Section 815.
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Looking first at the new tax-favored savings accounts, the president is proposing three new savings vehicles that would replace a whole range of existing accounts.
On personal savings, the president is proposing Lifetime Savings Accounts, or LSAs, and Retirement Savings Accounts, or RSAs, that would replace Individual Retirement Accounts.
LSAs would be available for any type of saving. All individuals, regardless of age or income, would be allowed to contribute up to $7,500 a year to their LSAs, and make withdrawals at any time for any purpose.
While contributions to LSAs would not be tax deductible, all earnings in LSAs would accumulate tax-free, and distributions would be tax-free as well.
RSAs, by contrast, are intended only for retirement savings. Individuals could contribute up to $7,500 to an RSA, with tax-free accumulation and tax-free distributions after age 58.
Any individual would be allowed to have both an LSA and an RSA at the same time.