EGTRRA Boosts Traditional IRA Contributions
Fewer U.S. taxpayers contributed to traditional, deductible individual retirement accounts and Keogh accounts in 2002, but the taxpayers who did contribute to the accounts put in more money.
Craig Copeland, an analyst at the Employee Benefit Research Institute, Washington, has published a report that uses the 2002 contribution data to assess the early effects of the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 on retirement savings.
President Bush signed EGTRRA into law in June 2001. One section of the bill increased the regular traditional IRA contribution limit to $3,000 for 2002, from $2,000 in 2001. In some cases, taxpayers also can roll assets from other retirement plans into IRAs.
The regular Keogh contribution limit increased to $40,000, from $35,000, according to the text of EGTRRA.
Copeland looked at preliminary 2002 data from the Internal Revenue Service and found that, thanks to EGTRRA, deductions for IRA contributions increased 30%, to $9.6 billion, and deductions for contributions to Keogh plans increased 19%, to $16 billion.
But the number of individual filers who claimed deductions for IRA contributions fell 3.6%, to 3.3 million, and the number who reported deductible Keogh contributions fell 8.4%, to 1.2 million, Copeland says.