Q: The administration's proposed tax reform would eliminate income averaging, which I assume covers both regular averaging and the 10-year forward averaging. Does the proposed elimination provide for a "grandfather" clause? I have about $40,000 in a pension fund that I plan to draw in a lump sum. Should I withdraw the funds this year?

A: Trying to guess what will come out in the way of a final tax reform package is a fruitless exercise. And I must caution you -- as I have in the past -- that this is not a news column; it is written well in advance of publication date, and things may not be the same when you read it as when I wrote it.

With those caveats, however, I can tell you that the president's original proposal calls for elimination of 10-year averaging on pre-retirement distributions. Repeal of this favorable tax treatment would be phased in over six years, starting with a 5 percent cutback in 1987.

The option prepared by the staff of the Joint Committee on Taxation would permit one election for forward averaging after age 59 1/2, but with a five-year rather than 10-year calculation. In addition, it would provide "grandfathering" in that the present treatment would be retained for assets in the plan as of Dec. 31, 1985.

Frankly, I don't know which way you should go. You have to weigh the advantage of another year's tax-deferred growth against the uncertainties of congressional action, both in terms of changing rules and of effective dates. I think I would be tempted to take the money and run.

Q: I retired on disability from government service in 1980, and had been using the disability income exclusion until it was eliminated in 1984. On my 1984 tax return I didn't claim the return of any of my contributions to my civil service retirement because I didn't need the deduction. Can I start deducting my contributions to the retirement program on my 1985 tax return, or did I lose the amount I could have deducted in 1984?

A: Bad news -- you lose whatever portion of your contributions to the retirement fund you could have deducted in 1984. The special three-year rule for excluding 100 percent of your retirement pay until you have recovered an amount equal to your contributions applies regardless of whether you would otherwise have had any tax liability on that pay or not.

As a result, you must subtract the amount of retirement pay you received in 1984 from your total investment in the plan, and may only exclude an amount equal to the remaining balance from pay received in 1985 (and 1986, if appropriate).

Q: I recently purchased some long-term Treasury notes on the secondary market through the local office of a major broker; the notes are in my brokerage account in street name. How safe a policy is this? Are the accounts insured by SIPC, in case the broker has financial difficulties? Should the truly conservative investor keep securities in his own name?

A: I think having an account in street name -- in which securities are held in the broker's name -- is a pretty safe policy. It's a lot more convenient than holding these notes yourself -- which requires proper safeguarding and then delivery to the broker at maturity (or earlier, if you decide to sell them). We handle our investment account in this manner.

Your account at the broker is insured by SIPC (Securities Investor Protection Corp.) for up to $500,000 (a maximum of $100,000 for cash in the account). In addition, the broker you mentioned carries an additional $2 million in account-holder protection with a major insurance company.

There is another option. You still may leave your securities with the broker, but in a form called "fully paid and registered," which means that the actual certificates are kept by the broker in a vault with your name on them. For obvious reasons, brokers don't like this method -- and I don't feel it's necessary. We don't lose any sleep worrying about our securities in street name.