THE EDITOR'S CORNER

In this space in January, in writing about tax-sheltered retirement plans in professional corporations, I misspoke in saying that one could retire on the interest from such funds without drawing on the principal for many years. With a large enough fund this would be possible, but not permissible under present law which requires that money be withdrawn from the principal upon retirement, either in a lump sum or in some annuity plan.

This does not negate the considerable argument in favor of such plans, but points to the need to be aware of all of the requirements of the law and to work out the arrangement for contributions and for withdrawals on retirement that is most suitable in light of the tax laws and the provisions of ERISA (Employee Retirement Income Security Act). Even if one withdraws the entire fund at retirement and pays the tax or makes annuity withdrawals periodically and pays the tax, he can still invest the portion he does not require for current living and have the money work for him separately from the retirement plan. Under present law there are also substantial estate tax advantages in the retirement plans of professional corporations.

Since tax sheltering through retirement plans of professional corporations is probably the best investment that a professional can make in the current investment and tax environment, each one of us ought to seek out the information and advice needed to make a wise decision over whether to incorporate, what plan or plans to adopt (profit sharing, money purchase, and/or pension plan), what the provisions of those plans should be, and how to maximize one's contributions.