
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, August 30, 1993                   TAG: 9308280008
SECTION: BUSINESS                    PAGE: 6   EDITION: METRO 
SOURCE: JANE BRYANT QUINN WASHINGTON POST WRITERS GROUP
DATELINE:                                 LENGTH: Medium

MOST SHOULD AVOID SHELTER SALES PITCHES

Are you wondering what changes to make in your savings and investments, in view of the increase in the income tax? For most taxpayers, the happy answer is "nothing." The new rules don't apply to you.

Only those with higher incomes have moves to make. But don't act too quickly on a salesperson's tax-avoidance schemes, especially if you're retired. The actual tax bite might be smaller than the price of switching to a new investment.

If you're in an income bracket where new taxes kick in, however, you have some options to consider.

Take higher-income retirees. You'll be taxed on 85 percent of your Social Security income if your "provisional income" exceeds $44,000 for couples and $34,000 for singles. (Provisional income is your adjusted gross income, your tax-exempt interest from municipal bonds, certain foreign income and half your Social Security benefit.)

For the financially comfortable but not super-rich, this change will cost a maximum of $1,470 this year, says financial planner Mary Malgoire of Bethesda, Md. On certain $60,000 incomes, you might pay an extra $1,372. But on certain $40,000 incomes, the tax increase comes to just $233, according to calculations made by the accounting firm Coopers & Lybrand. So take the time to check your tax before twisting your investments to keep your income under the threshold.

Retirees just above the threshold might consider (1) switching from taxable certificates of deposit to lower-paying tax-exempt municipal bonds; (2) giving your children some income-producing assets; (3) buying a tax-deferred annuity that accumulates income rather than distributes it; or (4) using a chunk of cash to buy cash-value life insurance.

There's a good case for life insurance for money that you mean to leave to heirs. If you unexpectedly need the cash, you can borrow it out of the policy. If you don't, the proceeds can pass to your heirs intact and untaxed.

by CNB