IRA Stampede

Taxpayers race the deadline

The annual April 15 rush to the post office to mail 1040 forms was rivaled last week by another race. Hundreds of thousands of taxpayers inundated financial institutions with applications for Individual Retirement Accounts. Dean Witter Reynolds kept brokers working until 9 every night and answered thousands of questions over a 24-hour telephone hot line. Last Wednesday alone, 7,100 Dean Witter customers opened new IRAs. Exulted Vice President Joseph Hamm: "It's been absolutely crazy."

Under a change in the law passed in 1981, all taxpayers can deduct up to $2,000 from their taxable income if the money is deposited in an IRA. The 1982 accounts could have been opened as early as January of last year, but many people put off getting one until they faced the choice of declaring $2,000 more in income or putting $2,000 away for retirement. By the time the books are closed on 1982, some 11 million taxpayers are expected to have deposited about $18 billion in IRAs, compared with only 3.4 million people who put away $4.8 billion for 1981.

Merrill Lynch, which has more IRA and similar Keogh accounts than any other firm (700,000), found the rush breathtaking. A fortnight ago the broker signed up 39,000 customers in a single five-day period. Then last week it nearly tripled that by entering 100,000 accounts. Merrill Lynch helped stimulate business by holding last-minute seminars in New York, Chicago and 70 other cities to explain the various kinds of IRAs. In the offices of the E.F. Mutton brokerage firm last week, $20 million per day went into new accounts. Said Gary Strum, head of pension services: "We have done a helluva lot of business."

IRAs can also be offered by mutual funds, insurance companies or credit unions, but banks and savings and loans have grabbed off the largest share of the business, and last week they were drawing big crowds too. California's Bank of America, which opened about 50,000 new accounts during March, had 64,000 applications in just the first two weeks of April. At New York's Chase Manhattan, activity last week was five times as great as in January and February. Observed Vice President Brian Holland: "Human nature being what it is, people seem to wait until the last minute." To accommodate all the eleventh-hour savers, First National Bank of Chicago kept its office open until midnight on April 15.

The rush to IRAs is not over. People who have already filed for an extension on their 1982 return still have four months in which to benefit from Uncle Sam's tax shelter. This file is automatically generated by a robot program, so viewer discretion is required.