Posted on 11/09/2008 5:53:17 AM PST by Libloather
Obama's retirement plan proposals
Retirees and workers with 401(k) savings may see changes.
By DAVID PITT
Associated Press Writer
November 09. 2008 6:59AM
The election is over and the message is clear — the economy is priority one. The big question now is how some of President-elect Barack Obama's campaign proposals will affect retirees and workers with 401(k) and other retirement accounts. Looking at them a bit closer may reveal some clues.
What are some of the ideas Obama has proposed that could impact my retirement planning?
One issue Obama has endorsed may get serious consideration before he takes the oath of office in January.
Obama proposed a temporary suspension of the required minimum distribution rule, which forces tens of millions of retirees to take money out of their IRA and 401(k) accounts once they turn 70 1/2. The rule is designed to give the government its share of the taxes on the money, which has been accumulating tax free. Failure to take out the money results in a 50 percent penalty assessed by the IRS.
Suspending the mandatory withdrawal would allow people to keep the money in the account and possibly recover some of their losses when the market recovers.
Obama's plan would temporarily waive the penalties and taxes on withdrawals made after age 70 1/2. There's interest in Congress to get it done — sooner rather than later.
The chairman of the House Committee on Education and Labor, Rep. George Miller, D-Calif., has asked Treasury Secretary Henry Paulson to suspend the tax penalty immediately.
AARP, the Washington-based group that represents 39 million people aged 50 and older, also has urged Paulson to take the action right away.
(Excerpt) Read more at southbendtribune.com ...
Might happen but if you're seeing this now, somebody's taking you for a ride.
I did see an article the other day talking about gun sales being up over 100% from a year ago this month but the prices are still pretty much at "normal" levels.
Mandating Equality
Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system.
The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”
Won't help the savings rate much either, but that's not what's being proposed here, in fact most of them make a great deal of sense. This is small time tinkering with the system, but it's a shame GWB didn't find the time to do similar tinkering.
-temporarily waive the penalties and taxes on withdrawals made after age 70 1/2.
Should be permanent, the government collects taxes eventually, there’s no interest in forcing distributions at an arbitrary age.
-allow workers to make hardship withdrawals of up to 15 percent of their balance from individual retirement accounts or 401(k) plans this year and in 2009.
Makes sense, though I see no reason for the 15% limit. Only politicians can predict the future with precision, imo there should be no penalty on premature withdrawls at all. A time frame for the funds to have been in, 5 years like a Roth for example, would be reasonable to establish the intent of long term savings.
-Eliminating income taxes for seniors making less than $50,000 a year.
Would be nice to eliminate income tax for everyone, but till we do, a senior making $50,000 should pay the same as a junior making $50,000.
-Matching 50 percent of the first $1,000 of savings for families that earn less than $75,000 a year.
I can’t think of any reason to do something like that, other than backdoor income redistribution.
-Regulating pensions more strictly by ensuring that bankruptcy courts cannot use pension funds to pay creditors ahead of some other company assets, prohibiting companies from giving executive bonuses while cutting worker pensions, and limiting the circumstances under which retiree benefits can be reduced.
A technical issue which makes sense. Actually, we need to revamp the bankruptcy laws to deal with “too big to fail” companies. Which aren’t the taxpayers responsibility. We could have called it Chapter GWB, but if it’s Chapter BHO, that’s OK too. File this under government actions designed to save taxper money, aka The Trash.
It makes a lot of sense to allow the value of the account to recover than to tax withdrawels at their present lower values. One could probably run the numbers and see that the government take is likely to be a lot less under present rules.
The problem I see that O will sooner or later want to confiscate the 401k’s as seems to be happening in Argentina.
I’m not sure what God thinks about suicide. I’ve yet to find anything about it in the Bible. If God is againist suicide that would be the only thing that would keep me from killing myself as my doors are kicked in.
And pretty much everyone above you post comments the raise suspicion that this is the first step to the government to take our 401K in the future not that it was mentioned in this article.
Most people above your post realize that this is a first step for the govt not the last step as you seem to think.
My call to Fidelity resulted in being told it depends on the
rules your employer set up the plan with.
Mine allows no withdrawls until retirement.
Count me out. I started the process of liquidation today. The bank has to mail me forms to fill out. Once they get them back, the deal is done. No taxes or penalties are taken out until tax time. It'll be up to me to report the money by April 15 and pay any tax and penalty for premature withdrawal. I'm more than fine with that.
The banker dood mentioned that the RATS may remove the tax exempt status on these accounts. He also thought that the total confiscation of the loot would be met with huge resistance from account holders (kinda like the bank bailout scam - eh?) RATS will do what they want to do.
I can't afford to wait for the RATS to spring some cutoff date on 401Ks where owners will no longer have access to their own loot. Without the tax exemption, the plan no longer works for me. I'm done.
Tell your friend he needs to get another financial advisor. Somebody his age should not have his retirement money in stocks.
If the Rats try this, I hope the Pubbies stand back and let them do it. Mess with a man's wife and you might get lucky. Mess with his wallet and he will fight. Take away everyone's 401k plan that people have worked their entire lives to save, and you will have 10 million pissed off peple descend on Washington before the sun comes up the next morning. There will be lots of folks swinging from lamp posts in DC.
Can you say "Change of Government?"
regards - red
So, here I sit wondering if I pull the 401K and buy the mortgage, or pull the 401k and not pay the mortgage and wait for the hyper inflation to make the 6% interest rate payment equal to a fancy dinner and buy a new car, a year's worth of food and some guns, or leave the 401k in the account let it regrow over the next 20 years and pray they don't confiscate them all, and come up with a decision before the end of the year, as every day I lose a little more wealth.
“Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs”
I read a lot of financial web sites, and at one point in the past few years someone raised the possibility of the government seizing private retirement accounts. This sounded like the most paranoid of tinfoil hat stuff at the time. I never would have believed these recent stories were they not in black and white all over the media.
Imagine if Bush or Cheney had proposed such a thing! The media would have gone into hysterical overdrive quoting Democrats about how they were stealing money for Halliburton, or some such nonsense. Now that it is the Democrats, little real examination of the issue.
Of course, if, God forbid, they actually do this they will spend the money within seconds of these seizures! Maybe this will be the Republicans’ come-back plan! LOL!
There's going to be a major market dive in January, when the people like me who can only change our 401K percentages once a quarter stop contributing. I was only putting in a few hundred a month but come the first payday in January that goes to zero, and there are millions more just like me.
Is that the famous “I just want to eat my pie” pic?
I have a little one. I tried to close it out only to be told that I can't unless I'm no longer employed by this employer, or I get permission from the payroll administrator. I'm very inexperienced when it comes to this sort of thing... in my family, we're more the "keep it in a mattress" types. I was blown away to discover I couldn't just snatch it out. I mean, I knew I'd have to pay taxes on it, but I didn't know it was so hard to just say, "Never mind, I don't want this account anymore."
Have you priced ammo in the past year?
I had the same thought but minus the broker. He would pay less tax now on the withdrawal and more annually on his return from, say, mutual funds.
Here’s some more change from Barry’s economic adviser Stiglitz. Quote from Bloomberg article which cannot be posted here at FR:
President-elect Barack Obama will need at least 18 months to turn around the U.S. economy, even if he ``does everything perfectly,’’ Columbia University Professor Joseph Stiglitz said.
``It won’t be easy,’’ Nobel Prize-winning economist Stiglitz wrote in the Outlook section of early editions of tomorrow’s Washington Post. ``More than 1.2 million private- sector jobs have already been shed this year, and by the end of the year an estimated 1.15 million people will have exhausted their unemployment-insurance benefits.’’
Stiglitz said Obama, who’s argued against cutting taxes for upper-income Americans, should also consider rolling back outgoing President George W. Bush’s 2001 to 2003 tax cuts as well as taxing dividends and capital gains as ordinary income.
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