The Federal Gov't Decides to Let Old Folks Keep Their Own Money - What's Left of It
As one of its final acts in the worst economic year since the Great Depression, the federal government passed legislation suspending for 2009 the rule requiring old people to withdraw a minimum amount of money from their 401Ks, IRAs, or other individual retirement accounts. The current rule imposes a 50 percent tax penalty on anyone over age 70 1/2 who fails to take their so-called mandatory distributions by the end of the year.
That's right, fellow oldsters--as a parting gift to all of us, the 110th Congress and George W. Bush, who failed to prevent or contain the financial meltdown that has cost some of us a third or more of our life savings, is now giving us permission not to spend some of what's left.
The idea behind the legislation is that seniors shouldn't be forced to sell off their investments at a loss. Unfortunately, however, it applies to 2009, not 2008--which is, of course, when our retirement accounts got gutted. According to the New York Times, some members of Congress urged Henry Paulson's Treasury Department to apply the same change to 2008, but it declined to do so.
In a letter to members of Congress, the Treasury Department said any steps it could take to address the issue would be "substantially more limited than the relief enacted by Congress and could not be made uniformly to all individuals subject to required minimum distributions." It also said carrying out the changes would be "complicated and confusing for individuals and plan sponsors."
Well, by all means, let's not confuse the old farts; we're having a tough enough time figuring out how how it is that we did everything we were supposed to do--worked, planned, saved, invested--and still got so royally screwed. And let's not complicate things for the financial institutions, who are already overburdened figuring out how to spend their $700 billion handout.