Candidates & Retirement Money

by Peter G. Miller
October 20th, 2008

What would the presidential candidates do with retiree pension funds?

The answer is not entirely clear, but some changes do stand out according to The Washington Post.

Both candidates agree that mandatory withdrawals from retirement accounts must end.

“The one proposal they agree on,” says the Post, “is suspending required withdrawals from retirement accounts, which kick in when you turn 70 1/2 . You have to withdraw a minimum amount based on the value of your account and the life expectancy of you and your beneficiary, every year for the rest of your life.

“Seniors facing mandatory withdrawals are in a jam this year because the required amount is based on the value of their holdings as of last December — before the market tanked.”

Sen. Barack Obama says that individuals should be able to access 15 percent of their retirement funds but not more than $10,000 without penalty — at least until the end of 2009. Currently there is a 10 percent penalty for those below age 59.5.

Sen. John McCain, according to the paper, “has proposed taxing withdrawals from IRAs and 401(k) accounts in 2009 and 2010 by those 59 and older at a 10 percent rate. Currently, such withdrawals are taxed up to 35 percent, depending on income. The proposed 10 percent rate would apply to the first $50,000 withdrawn in 2009 and 2010.”

This would be a great deal for those in the upper income brackets because it would mean that money placed in retirement accounts tax-free could be withdrawn at lower rates. For the poor it would mean little if anything.

Not to rock anyone’s boat, but how about this: The right to withdraw money from retirement accounts at any age and without penalty to stave off foreclosure? Can we agree on that one? Such a proposal might stem the growing inventory of foreclosed properties, the inventory pushing down home values.

And here’s another: Since reverse mortgages are overwhelmingly insured by HUD, how about mandated interest rates, points and fees so that all reverse mortgages have the same terms. This would assure that no senior pays too much — and that no lender makes too little.

If this seems somehow unfair, unreasonable or unwhatever, consider that until 1983 the federal government set FHA rates and the country did not dissolve and lenders did not usually go bankrupt.

For the full story from the Post, please see: The Candidates and Your Savings, October 19, 2008.

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