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 ...
there fixed
I would not be surprised that in the near future retirees will become Soylent Green like Edward G Robinson.
Anyone too young to have ever seen the movie should rent it.
ping
Note to persons with 401k’s:
If ther is away to be penalized now by dipping, strongly consider it.
Note to self: Must see if I can withdraw any of my non 401 type money to put in safer location, like my matress.
This is scary
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.
Eliminating 401K’s will crush, I mean CRUSH, the market. We’ll be partying like it’s 1929. I’m hoping Volker is able to head this one off at the pass.
Did Obama have any plan for 401k or retirement funds before the election?
Mattress = bad
Gun safe = good
But ole’ E.G. did have a nice send off. The movie is an interesting treatment of the global warming theme.
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.
Dems Target Private Retirement Accounts
Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs
http://www.carolinajournal.com/articles/display_story.html?id=5081
Yep....the knuckle sandwich. bait and switch. The oldest Con in the books, and (given the election results) it will work. A penny today, tomorrow we take your bag of gold.
ping
Because I’m a gun owning Christian Conservative I’m halfway expecting to be sent to a reeducation camp within the next few years. I will be truly amazed if we will have another presidential election in 2012. History is repeating Germany’s 1930’s here in America with that Commie as Hitler.
Of course I won’t give up without a fight (from my cold dead hands) but two bullets will be saved for my beloved dog and cat because I would rather kill them myself than to have God only knows what done to them after I’m arrested.
The gov't has no business matching savings. Designated personal accounts will no doubt be invested in gov't obligations to fund liberal causes. Gov't obligations will end up being worth next to nothing. This is completely ludicrous.
of course being forced to do something is the point, but you could take advantage of the situation since he cant change it.
I wonder if this includes 403(b)’s as well.
In the movie Charleston Heston is a cop in the future, his best friend is retiring and accepts a peaceful assisted suicide with full surround sound and orchestrated music graciously supplied to the public so that instead of sitting in retirement homes drawing a pension the elderly can die with honor, however the world has a severe food shortage and so to shorten the story here CH follows his friends body to a processing plant that grinds the bodies up into something like a PowerBar,
See the movie.
McCain was the first to raise this issue, and suggested eliminating required withdrawals for retirees back in August.
Yes, I heard many of these ideas before the election. Pretty much everyone above you is guilty of posting without reading and understanding what the article was saying. They are actually pretty good ideas (which is why either they're not Obama's or they'll never get into law).
The only two that are genuinely bad are allowing people to dip into their 401k's for emergency funds for 2009, and having the government match employee contributions. The first one is a REALLY bad idea (and identified as such in the article) - it will take a lot of capital from an ailing market and the funds will never be paid back to the 401k's. The other one socializes our retirement.
The article never says word one about them confiscating our 401k's, which is what the Dems in Congress want to do.
The idea makes sense to me.
“Soylent Green is people”
I am cashing out I think so they can’t get my money anymore than the taxes I will have to pay anyway and I won’t contribute a cent more than what they take for taxes.
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.
I’m a few months shy of turning 52. Under O’Hitler’s health care plan I won’t be surprised to see people denied health care once they turn 55 or 60 or those even younger or born with birth defects denied as well.
I’ve read where that monster will mandatorily close all neo natal units in every hospital in this country. Premies will be tissue that just didn’t miscarry instead and like those babies that survive abortion will be forced to die.
Well if the Dems want to see financial armeggedon and the Depression they seem to so desire - nationalize 401K’s. Then sit back and watch how quickly EVERYONE pulls their money out of thier 401K’s before the Govt grabs them.
They move to do that, and you will see the market crash by at least 75%
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..
I don’t think the article mentions eliminating 401IKs. Honestly, I don’t think they’re that stupid. Keeping Wall Street happy has become the #1 priority of both parties. It is too big a reservoir of contributions and cronies for it to be otherwise.
All your retirement accounts are belong to us.
Could this possibly mean what it says and a person could leave their 401K/Thrift Savings alone and they would pay no tax or penalty upon withdrawal at age 70.5?
If true, it would be good for those who reach 70.5 before Obama leaves office in 2012, but not for those who won't.
401ks are down 40%
Guns and ammo? up 200% plus.
http://www.carolinajournal.com/articles/display_story.html?id=5081
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.
Is there any way to get that word out? Rush, Sean, Huckabee? The only thing that's going to slow this guy down is calling him on stuff early on. If McCain brought it up first, then people should know it wasn't some stroke of genius on O's part.
If something like this passes, I’m wondering whether it would be wise to liquidate my 401K (about 140K after the losses) and pay off my mortgage. Would appreciate any FReeper advice.
ping
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.
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