Last Minute Fix By Congress Stops Mandatory Pension Withdrawals

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One calculation that anyone over 70 needs to make every year is for mandatory pension withdrawals. Seniors are facing a real dilemma in 2008. The mandatory withdrawal amount is based on the value in the account as of the previous calendar year end. So, the withdrawal in 2008 is based on the value as of 12/31/07. And that value is a lot more back then than they see now. So they are being forced to take money out of an account that has already been depleted. In fact, since 12/31/07 American pension plans have lost 900 billion dollars.

Congress is talking about taking emergency action to change the regulations on how to calculate the mandatory withdrawal and even the IRS is talking about making change. But with barely only two weeks left I don’t think we’ll see any action that will really help.

One change Congress did pass, and Pres. Bush has said he’d sign, is to suspend the mandatory pension withdrawal for 2009.

I think that this is something that will change, and possibly forever. My husband Richard and I were talking about this particular provision last night. What public interest does it serve anyone to require someone to withdraw from their pension account? There are many people, especially business owners, who work well into their 70’s. And if they’re involved in a business they quite likely are caught in a circular equation of continuing to contribute to pension plans at the same time that they are required to withdraw money that they neither want or need. And for the people who are hoping to be able to recover some value in their pension plans so that the rest of their golden years aren’t spent dining on cat food (or living with their kids), making them take some of that precious principal out now makes no sense whatsoever.

Many people have already discovered, or will soon discover, that the real estate, stock and credit meltdowns have dramatically changed their retirement plans. People are going to work longer now. Retirees will have to re-enter the job market. The mandatory withdrawal just doesn’t make sense anymore.

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