The case of “forced” distribution of 401K funds at 70...came up with a friend of mine this past month. He really didn’t want to touch the money but the Vanguard folks are going to force the issue because of the law. His account was worth $200k two years ago. Its barely $120k currently because of the stock market losses. He’d rather wait two years before taking any funds out but the law isn’t written in a way to provide for that. Personally, this is the one idea that some folks might support. Makes me wonder why the Republicans didn’t bring this up two months ago? But again, a day late and a dollar short on real thinking has been the Republican slogan for the past year.
The first thing I have agreed with... I don’t think they should force the withdrawals but why do I have a feeling that people could keep the money in only to later be socked with some other new penalty they will create.
of course being forced to do something is the point, but you could take advantage of the situation since he cant change it.
McCain was the first to raise this issue, and suggested eliminating required withdrawals for retirees back in August.
The idea makes sense to me.
I have been making posts about the idea since 1996.
There's really no reason for forced withdrawals at 70 and 1/2. By that time virtually 100% of the funds in any 401(k) or IRA consists of capital gains, not the income originally deposited.
That means that when it is withdrawn it will be taxed at the higher ordinary income tax rates and the saver will actually suffer a loss not forced on other categories of investors.
Here's what needs to be done ~ eliminate the 70 and 1/2 years age standard. Secondly, track withdrawals from these accounts so that once the saver has withdrawn his or her original earned income deposits, and paid the income tax on them, any future withdrawals are subject only to capital gains taxes.
A one time end-stage withdrawal and conversion to a regular equity fund should probably be devised to deal with this.
That way you wouldn't be forcing the elderly to pay an extra tax penalty simply because they got old faster than they could remember.
Oh, yeah, and Social Security ~ since that money is taxed as you make your payments into the system, it should be a simple matter to exempt from taxation any initial payments made up until the time the retiree has withdrawn benefits equal to that amount.
For some strange reason Republicans tend to fritz out and go balmy when faced with any beneficial changes in Social Security ~ like establishing tax equity.
Democrats sure don't want to do it, so why not Republicans taking the lead on this AS THE BOOMERS REACH RETIREMENT AGE.
Gotta' be some votes in that group.
This is actually an idea that McCain and Republicans supported and suggested. I hope that it happens. What I don’t want to see is the government take over 401k or force people into a government kind similar to social security.
If Hussein does this, I could go along with it...but I don’t think this was his idea from the get-go...it was a Republican idea..
It's not going to happen -- unless perhaps in a modified form included in some draconian confiscatory measure to take the edge off the pain.
Obama's government is not going to forego a penny of revenue. Most of the plans discussed in this article, by the way, were based on campaign promises/slogans.
All that is so over. The state of the economy will now be used as a call for national sacrifice -- of your money, naturally. The process began with that press conference the other day, when O used the past tense in reference to those famous 95% tax breaks. If you listened carefully you could almost hear them sprout wings and fly, sadly and wistfully, into that future of hope and change, which will take at least eight years to accomplish, of course.
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.
Tell your friend he needs to get another financial advisor. Somebody his age should not have his retirement money in stocks.
Your quote: The case of “forced” distribution of 401K funds at 70: Makes me wonder why the Republicans didn’t bring this up two months ago? But again, a day late and a dollar short on real thinking has been the Republican slogan for the past year.
McCain did bring this up as something he would do. NO one listened except Obama said it was a good idea. I thought it would happen because it is the right thing to do and both parties would rush to do it.
they want people to just leave their money in there....
Mccain supported the same thing. MSM just did not pay much attention to him when he said it.