IRA distribution relief on the way
As time runs out, readers have asked whether Congress has gotten around to giving them some relief on required IRA distributions.
These are withdrawals that investors must make annually after turning 70½.
The problem: withdrawals are determined on the size of the account at the end of the previous year.
A year ago, the market was a lot higher and hotter than today. The result is that older investors could end up now having to take out more from their accounts than they want, and selling stocks in one of the most bearish markets.
With just a few weeks left to the year, Maryland congressman C.A. Dutch Ruppersberger says he plans to introduce legislation — Retirement Fairness and Emergency Relief Act of 2008, H.R. 7278 — that will suspend mandatory withdrawals.
The legislation would also allow younger investors to pull money out of retirement accounts to pay rent, the mortgage, utilities or groceries without incurring a 10 percent early withdrawal penalty.
Ruppersberger is holding a press conference on Monday to talk about his legislation.
It’s not clear yet what relief there would be for older investors who already have taken distributions.
Also, there has been criticism that relief from mandatory IRA distributions helps high-income seniors who don’t need to live off their IRA money and can forego distributions for a year or so.
Comments
I think for younger investors there should be an option to borrow from IRA, not just to "pull" money. For example, I might want to use 10K from my IRA account for a downpayment, but I'd like to return that money, so that it can earn more interest. Right now such option exists only for 401k, as far as I understand.
By permanently removing money from IRA accounts we'll be just digging deeper into future debt. Retirement savings are already too low for many.
Yes, as a personal finance writer, I have to admit I'm divided on measures allow people to spend their retirement money during tough times. You know they need the money now, but you worry what will happen to them later. - eileen
Posted by: Jelena | December 5, 2008 2:12 PM
The 70.5 distribution regulations should be repealed all together. Also, eliminating the 10% penalty for distributions by younger workers is a horrible idea. Selling your retirement account now locks in a 20-30% loss, if you leave it in your account and the market rebounds in 10-20 those young workers will lose a lot of money.
Buy low sell high!
Posted by: Fred Mertz | December 5, 2008 2:40 PM