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IRA and 401 K Mandatory Withdrawals for 2008. Tax Status.?
McCain and Obama suggested deferring the required withdrawal of assets from retirement accounts.
Is anyone in congress proposing a bill to give seniors Relief in 2008?
Yes wartz I said McCain and Obama both proposed it. Has anyone in congress actually initiated a bill? Who?
Judy. What you probably don't understand is that the tax on funds withdrawn at the end of 2008 is based on the maket value at the beginning of the year. This makes mandatory withdrawals a double wammy for seniors. Sell at 65% tax at 100%.
Sale of non sheltered stocks are taxed at date of sale and at a capital gains tax rate. (triple wammy)
vb. Sorry. My comment about non sheltered stock was the fact that the tax on those is at 15% capital gains rate at the time of sale. The tax on 401 k stock (forced) sales is at your income tax rate at their value at the beginning of the year. (35% higher) Tripple wammy!
3 Answers
- Anonymous1 decade agoFavorite Answer
You are skewing the issue.
Let's say your life expectancy was 10 years. Thus your RMD (required minimum distribution) would be 1/10th of your account balance on 12/31/2007. If you hadn't taken any of the money out before the market crashed, you may feel like you are being forced to take 20% out and depleting this resource. The actual tax is still based on the dollar amount taken out, so the tax bill is NOT higher than you estimated at the beginning of the year. Thus saying "sell at 65%, tax at 100%" is mathematically wrong.
Your added comment about selling "non-sheltered stocks" being a 3rd whammy makes no sense--unless you are complaining that you now have a loss and can't even take it after the first $3000.
- JudyLv 71 decade ago
I haven't heard that anything has been formally introduced. But since most "regular Joe's" withdraw from their 401K or IRA because they need the money to live on, deferring the required minimum distribution wouldn't affect them so this doesn't really "give seniors relief".
A withdrawal from a 401K or IRA, mandatory or not, is subject to regular income tax. Neither is suggesting eliminating that.
- Anonymous1 decade ago
There is a proposal to suspend mandatory IRA withdrawals at age 70 1/2