Penalty-free 401(k) withdrawals still not on the agenda (Obama breaks a promise)

Politi-fact ^ | April 10, 2009 | Angie Drobnic Holan

[Michaelo]

So what's going to happen to the people who withdrew 401K money in 2008 once they heard Obama say that they would not be penalized for it? Remember, this tax deduction would have been retroactive to 2008. Penalties to withdraw early are high, up to 40% depending on the person.

Now it's almost tax day and no action has been taken.

Thanks for nothing, smooth talking candidate.

[Atlas Sneezed]

I seems the time may soon arrive when cheating on taxes will be commonplace, and considered the patriotic thing to do.

[dawn53]

I waited and didn’t take a withdrawal, but I was really hoping this would have been on the table. Makes perfect sense to stimulate the econony.

[HangnJudge]

I seems the time may soon arrive when cheating on taxes will be commonplace, and considered the patriotic thing to do.

[babygene]

” Penalties to withdraw early are high, up to 40% depending on the person.”

Why should this be a problem.. Just say your 59 1/2 and refuse to show your birth certificate.

[Mad_Tom_Rackham]

"You can't spend your whole life worrying about your mistakes! You f*cked up - you trusted us!"

[Oldpuppymax]

“Borrowing” ones own money from Big Brother at a 40% rate of confiscation! Ain’t it swell to live in a free country!

[JohnG45]

Obama breaks a promise

Don't you mean, Obama breaks another Promise?

[Mad_Tom_Rackham]

Makes perfect sense to stimulate the economy.

Except for one simple fact: YOU would be deciding where to spend YOUR money. Only the all-knowing bureaucrats and politicians are qualified to do this.

[tacticalogic]

Don't you mean, Obama breaks another Promise?

Fortunately, every one of his lies is somebody that got conned into voting for him's last straw.

[Mad_Tom_Rackham]

Just say your 59 1/2 and refuse to show your birth certificate.

I like the way you think.

[no-no bad dog]

I’m not sure but can’t you take a 401k and roll it into a rollover IRA then to a Roth IRA and not have to take any penalty (other than the taxes that we already owe on the money)? Roll to a Roth and pay no penalty, then cash what you need out of the Roth and pay the tax.

[STONEWALLS]

“It seems the time may soon arrive when cheating on taxes will be commonplace,.....”
......when people feel their taxes are unfair they will give themselves “tax cuts”....and you’re right,the time is coming soon....we’ll be just like Italy where tax evasion is said to be routine.

[sono]

Barack Lied, Families Cried.

[babygene]

“Penalties to withdraw early are high, up to 40% depending on the person.”

BTW, I believe your 40% number is incorrect... If you are under 59 1/2 the penalty is 10% plus the taxes. Even then if done correctly you can avoid the penalty as long as you withdraw only 10% (could be 8%, I’m not sure) per year. You must withdraw this amount for 5 years though.

[andy58-in-nh]

Oh, just wait until the next shoe drops: Federalization of retirement plan assets.

The stock market is just too volatile and scary for people to control their own retirement funds, you see. So our Most Benevolent President will ask Congress to eliminate all the different contributory retirement plans now available (401k, 403b, IRA's, etc.) in favor of a shiny, brand-new Unified Retirement Account - where all the contribution rules will be the same for everyone and your investment will be guaranteed against loss!! Sounds wonderful, right?

Uh, yeah, except for this: your money will earn a fixed rate of 3% per year and will be inaccessible to you until you retire at age.. oh,.. haven't figured that out yet, but don't worry, the government actuaries will get right on it. The same actuaries, by the way, who say that Social Security is perfectly sound. Feel better now?

[muawiyah]

Frankly, with Obama as an example, there's no reason whatsoever for any of us to PROVE OUR AGE.

Imagine the distress at IRS if everyone claimed he or she were 65 ~ even those over 70.

[A_Former_Democrat]

“My advice is they both start drinking heavily”

[PugetSoundSoldier]

I don’t think there’s an early withdrawal penalty if you pull out from your IRA/401K to pay Federal taxes due. So underpay your taxes during the year, and then withdraw from your IRA/401K to pay the taxes due.

I am not an accountant/CPA, but I try to find ways to slowly and surely eliminate wealth that has US Government strings on it...

[chuckles]

I sent another idea to my congress critter recently.

I lost a ton in the market back in 2001, about 1/3 of my non IRA funds. I was only allowed to take $3k off a year. Now that I'm retired, I'm pretty much living off my IRA funds and my taxable funds are pretty much gone after losing again this year. I will NEVER have the chance to recoup my losses unless I sell my house and use the money to invest with. So now, I just withdraw from the IRA and take my measly $3k off every year.

If anybody cares enough here, write your congress men and Senators and ask if the loss level could be raised to a more appropriate number, like maybe $10k-$20K. That way I could draw out more money and not have to pay taxes on it after losing such a large sum over the years. At $3k per year, it will take the next 50 years to get even on the amounts I have lost, while still paying taxes on money I draw out of my IRA. My IRA has losses also, but at least I have a few years to recoup some of them.

Does anybody know how long the $3k limit has been in effect? I'm betting at least 30 years. $3k 30 years ago would be like $20K now.