WSJ: McCain's New IRA /401K Withdrawl Proposal Only Benefits Wealthy:

[amborin]

"McCain Calls for Suspending Rule on Retirement Accounts
Elizabeth Holmes reports from Minneapolis on the presidential race.

John McCain called for suspension of the requirement that retirees must begin liquidating their retirement accounts when they reach age 70 and a half, the latest economic policy rolled out by the Republican presidential candidate.

John McCain greets supporters at a rally in La Crosse, Wis., Friday (AP)
The Arizona senator announced the plan at a rally Friday morning in La Crosse, Wis. Buried a third of the way through his typical stump speech, McCain said his priority was to “protect investors – especially those relying on their investments for retirement.”

“Current rules mandate that investors must beginning to sell off their IRAs and 401Ks when they reach age 70 and a half,” he said. “To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended.”

Dallas Salisbury, president of the Employee Benefit Research Institute, says similar proposals have been put in front of Congress over the years but have not passed because it would help only a portion of the retired population. ]

“The vast majority of individuals have relatively small account balances,” he said. “So for more individuals, they would have had to started taking the money out long before (age) 70 ½.”

McCain’s proposed suspension is aimed at wealthy retirees, individuals who have enough other forms of savings that they do not need the money in those retirement accounts, he says.

Suspending that part of the tax code would benefit “high pension or high-net-worth individuals,” Salisbury said, that allows them to live beyond the cut-off age “without even needing any of the money in an account to help support them.”

The U.S. tax code requires Americans to begin withdrawing a percentage of the funds in retirement accounts at the age of 70 and a half, or if they are still working at the age, at the moment they retire. “There is no reason to force the unlucky few who find themselves currently hitting this mandated timeframe to sell holdings at a time when our stock markets are in turmoil,” a statement from the McCain campaign said.

The campaign’s economic policy director, Doug Holtz-Eakin, said the proposal is a temporary suspension. Holtz-Eakin said that when McCain, who is 72 years old, heard about the requirement to begin liquidating assets, he said, “We should stop that right now.”

The weakened economy has hurt McCain in the polls. The Gallup daily tracking poll shows a big hit for the candidate came when he announced the suspension of his campaign on Sept. 25. In the 16 days since then, he has consistently lagged behind rival Barack Obama by at least four points. The latest survey, released Friday, showed a 10-point spread between the two."

<http://blogs.wsj.com/washwire/2008/10/10/mccain-calls-for-suspending-rule-on-retirement-accounts/>

[pnwmom]

1. That's not really true. It would benefit any retiree with money in an IRA

who expects to live another 10 or 20 years and hopes that, in the meantime, their stocks might gain back some of their value. Otherwise, they'd be stuck selling substantial amounts over the course of a few years into a down market.

How would the non-wealthy person live in the meantime? Many non-wealthy retired people have a home with paid off mortgage. Rather than selling their stocks at a loss, they might prefer to take a reverse mortgage on their house and live on those funds until their IRA's have regained value.

[amborin]

2. did you read the article?

[pnwmom]

3. I read the part you put in your post. n/t

[kets]

4. It's about not paying taxes . . .

It's ridiculous. If you are forced to sell and don't need the money, you can always sell your stocks, pay taxes, and buy the same stocks again. Of course not as many, but that's what paying taxes is about, right?

So this is all about not having to pay taxes - not about having to sell in a down market. That's the way to go - rich people paying less taxes. Where have I seen that before . . .

[doc03]

5. The point of an IRA is for people to

build a nest-egg for retirement not to pass their money on to their children tax free IMO. If you are 70 years old and haven't started withdrawing any money from your IRA you are obviously at lot more well off than most retirees. I don't understand why anyone wouldn't be using at least some of their IRA by the time they are 70 years old, just how long do they think they are going to live anyway. Another thing all they have to do is start making withdrawals based on the average life expectancy, they don't need to withdraw all of it. I'm 60 1/2 and plan on retiring when I reach 62 I will get SS and a monthly pension (I hope) and I plan on withdrawing around 5% from my IRA yearly as part of my income. I plan on using the income to travel and enjoy life while I am still healthy enough. I don't know the figures off hand but a fairly good percentage of people end up in a nursing home or dead by 70. If you end up in a nursing home they will be more than happy to use your IRA money. If you end up dead your beneficiaries will party on the money.

[truthisfreedom]

6. What if the market continues to decline? What will happen to these poor people then?

Thanks but no thanks, McLame. You are no economist. You didn't know this was coming, and you don't know what to do about it.

[mrreowwr_kittty]

7. I'm sorry but I TOTALLY disagree with this proposal.

The market may be down, but the whole reason for RMDs (required minimum distributions) is so that affluent retirees can't get out of paying at least the minimum of taxes on their IRAs. People who are going into retirement now had the best possible situation, taxation wise. They put money away, tax deferred, back in the 70s when the tax rates were at almost the highest rate, and are taking it out now, when taxes are at the the lowest. If you are in a position where you are considering delaying taking distributions on your IRA/401k, you must be doing pretty well. Taking out 5% or so a year is not going to destroy someone with a healthy nest egg. We NEED that revenue.

[doc03]

8. I agree with you making someone take a small

distribution from their IRAs at age 70 isn't any great burden on them. I can't understand why someone would not be taking money out at 70, either they plan on living forever or they want to give it to a relative so they can piss it over the fence.