Tax shift good for IRAs
Boston — The mutual fund industry is enthusiastic about its sales prospects for individual retirement accounts (IRA) in the coming year. In the Economic Recovery Tax Act of 1981, Congress enlarged the amount of money that individuals can put into such accounts tax free in 1982 and thereafter. And it allowed those who already have corporate pension plans to set up their own IRAs.
The change, says Reginald Green, a spokesman for the industry's Investment Company Institute, could have a ''profound effect'' on mutual fund sales. The industry estimates some 116 million Americans will now be eligible for IRAs.
Just as important, many of those eligible will be in higher income brackets and more accustomed to dealing with financial advisers and stockbrokers. So the industry expects to win a larger proportion of IRA money.
Up to now, only 5 percent of IRA money was put into mutual funds. Most of that money went into plans offered by banks or thrift institutions.
With the new law, the mutual funds expect to attract about $5 billion of total IRA investments, predicted at some $20 billion per year.
''We regard mutual funds as nearly ideal for IRAs,'' Mr. Green said. He noted that funds invested in common stocks have in the past five years beat the stock market averages in performance. And, he went on, IRA money invested in a fund belonging to a mutual fund group can be switched at any time from one type of fund to another, depending on the economic situation or other factors.