Calls to suspend the 10% penalty tax on withdrawals from retirement accounts

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limitdown

There are calls amongst tax accountants, when asked, what could they recommend to the administration for public discussion to help, with the economy and households and their clients.

In short, and without revealing confidences, the net essence of their conversations and discussions were to suspend the 10% penalty tax on early withdrawls from (all) personal retirement accounts, and to make it retroactive or needs based (simple qualification checklist on the tax form) for at least two years from present, and temporarily allow it through the 2011 tax years.

The thinking is that this will directly effect (after the fact) those hurt most, namely those with retirement funds, who have sacked so much of them just to stay afloat and save their houses, credit scores and such.

Needless to say, we all know of those who have, just getting someone to reveal such a personal detail would be harder than getting free money in front of a (house of worship -- just choose any one....).


When I heard this serious thought from responsible professionals, I thought about bringing it before these trading boards. Hope its well received (i.e. serious comments only)

let's keep things positive, too
 
John Crudele has been advocating this for at least a year. In a recent column (which I can't find, will have to go from memory) the last point he made was that the fed is not going to consider this citing anon sources as saying that people will not use the money wisely.

Below is one article.
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Dear J.K.: First, let's correct what I've been proposing.

I've suggested that the government change the rules on withdrawing all retirement funds as a way to stimulate the economy without increasing the federal budget deficit. Specifically, I think people should be allowed to withdraw money from retirement accounts like 401ks and IRAs in order to purchase real estate.

There would be restrictions, like how much of your retirement dough could be used for this purpose.

Yes, I think these withdrawals should be exempt from the tax penalties when you take money out early. I also think people should be charged reduced, or even no, ordinary tax on these withdrawals.

After all, we are trying to get them to participate in this plan.

This'll boost the housing market without costing taxpayers billions -- like the $8,000 first time homebuyers credit is doing. In fact, my idea will cost nothing except lost revenues in the future.

And my plan will distribute the benefits over a wider part of the population.

Is this idea getting any attention in Washington?

Funny you should ask that, because over the past two weeks I've been engaging in an e-mail exchange with someone who is working on economic policy in Washington. But we are doing so through an intermediary on Wall Street, so I don't know who exactly is on the receiving end of my idea.

The Obama Administration said recently it was looking for cost-free ways to stimulate economic growth. Well, that's good, because if they spend much more, the financial system of the US may never recover.

What I'm suggesting is the only way I can think of that would accomplish the cost-free alternative that President Obama is seeking.

But I've been warned that there are lots of egos involved in Washington, and not to expect too much. So I'm not, until they are absolutely desperate. That time should come in a few months.

Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or john.crudele@nypost.com.



Read more: http://www.nypost.com/p/news/busine...stimulus_vjA7TMLNac7ESosIFhiXMO#ixzz0YZQNCXKL
 
it is quite refreshing to see other mature, serious responses to this very important matter

we clearly will have to keep this thread alive, and support it during trading hours so that the monitors and visitors of substance in the administration and other halls of power will be reminded that if they want to curry favor with the general populace

then this most popular, targeted, beneficial change would really gain positive notice

cheers all.

clearly millions have already voted to remain financially afloat through this means,

its is only reasonable to help them, instead of the private sector, for which there are too many AIG's, GM's, GS's and others and no new jobs or turnaround in the economy....

right now, it remains everyone for themselves, in all reality!
 
It sounds like a good idea. Instead, why not lower the penalty to 5 or 6% ? People would still think twice about the early withdrawal and hopefully spend the money wisely...
 
Quote from stinkyfelix:

It sounds like a good idea. Instead, why not lower the penalty to 5 or 6% ? People would still think twice about the early withdrawal and hopefully spend the money wisely...
More...

there were so many statistics and suppositions that people were sacking their 401k's, 201k's, 101k's and 50k's

that they were expecting an unexpected surge in tax receipts as a result of this,

these were the stories from over two years ago, in 2006 tax reporting year.

making this retroactive would help those families directly and unexpectedly and much needed source of funds...

making this going forward for a limited time, say FY 2011 / TY 2012 would still help where this problem still persists.

this economy defies all political definition, solution, arguments and pundits...

what is needed is common fellow feeling for the common man savaged by having the middle class sacked to pay for the wealthy tax breaks and unnecessary refunds....
 
I'm no accountant, but I think it would also be good it people could bypass IRA contributions for a year or two and be allowed to accrue those missed contributions. So skip this yr and next yrs 4k or 5k contribution and be allowed a 12-15k "catchup contribution" if people are in a better position 2 or 3 yrs from now.
 
How will it affect the market in the short/long run?

Assuming they use the money to pay off bills, it basically goes back to the creditors and is pumped right back into the economy. What if some decide to hide it under their mattress?
 
Quote from aegis:

How will it affect the market in the short/long run?

Assuming they use the money to pay off bills, it basically goes back to the creditors and is pumped right back into the economy. What if some decide to hide it under their mattress?
More...


repealing or suspending the penalty tax of 10% of the withdrawal amount, and then subjecting the entire 110% to current tax rate of the individual, company or otherwise would have the effect (especially making it retroactive) woul:

  • put money back in the hands of those hurt worse by having to have made the decision to make an early withdrawal, just to stay afloat
  • provide a refund targeted to those who directly had the outlay of funds, without changing or tampering with the Federal budget
  • provide an unexpected helping hand to those, months after the outlay, sometimes almost two years after, in present terms, and provide them with a lifeline or helping hand, without there being some longterm social program attached or requiring an act of Congress to support
  • do for the middle class and the families hurt most, what was already done to these selfish corporations at the expense of the middle class taxpayers

hope that puts a positive spin on this, and answers the question posed.
 
Possibly the market is an unsustainable ponzi via 401k, and retiring baby boomer redemptions.

If you have no match on a 401k and have no tax liability (ie working at Mcdonalds) what's the point?

Fewer people contribute to an 401k, fewer cos, offering one, large chunk of people aren't pooling money to sustain the market.

My daughter is a single mom and it'll be years before she has any tax liabilities she'll need to offset. She will have better investment opportunities than buying some lame ass fund her co offers through her 401k.
 
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