THE ABCs OF IRAs

An instructive brief for financial babes--and a more effective plug for Individual Retirement Accounts than today's costly, confusing ad campaigns. To emphasize the wisdom of providing for oneself, Grace reviews the shortcomings of Social Security and private pension plans. Taking up how IRAs work, he stresses the advantages accruing from the deductibility of annual contributions, and the deferral of tax liabilities, in the context of recently liberalized legislation. (Included are tips on filling out returns and avoiding IRS penalties.) A lengthy section compares the various organizations that serve as IRA custodians: depository institutions (banks, credit unions, thrifts); brokerage houses; insurance companies; and mutual-fund groups (most of which permit no-charge switching). Among other things, Grace notes that interest on an insurer's IRA annuity is compounded annually, as against daily compounding for most depository-institutions and fund commitments. A broker himself, he makes a discreet pitch for full-service NYSE members; but he recommends so-called self-directed IRA programs only for those who have accumulated at least $10,000 and can stand up under the psychological pressures of managing their own money. For less than affluent novices, Grace favors ""sure-thing"" investments like wild-card CDs--and touts mutual funds with superior long-term performance records. At the close are 100 questions-and-answers on: contributions; taxation; investment; and distribution. With a reference-worthy appendix too--a better bet for novices than Jack Egan's first-rate, but more demanding, Your Complete Guide to IRAs and Keoghs (p. 914).