IRS to Crack Down on IRA Tax Rules
If you have an individual retirement account (IRA), now is the time to make sure you have been complying with tax rules. . .
Read moreNo group of Americans is feeling the plummeting value of stocks as acutely as retirees. Average retirement accounts -- IRAs and 401(k)s -- are down more than 20 percent from a year ago, according to the Congressional Budget Office. Retirees are seeing large chunks of their hard-earned retirement income evaporate before their eyes. Others who may have planned to retire soon are being forced to rethink their options.
Both Sens. Barack Obama and John McCain have responded to retirees' and near-retirees' deep concern by rapidly unveiling new policy proposals to temporarily relax some of the rules governing retirement account withdrawals, to allow easier access to funds and to shield older investors from being forced to sell assets in a down market.
Both candidates have proposed temporarily waiving federal rules that now require older Americans to begin withdrawing retirement account funds as soon as they reach age 70 1/2. Obama called on the Treasury secretary to allow the change by suspending a federal regulation.
But this change would likely benefit mostly wealthy retirees who can afford to leave their stock investments untouched, said Dallas Salisbury, president of the Employee Benefit Research Institute.
"The vast majority of individuals have relatively small account balances," Salisbury said. "So for more individuals, they would have had to start taking the money out long before 70 1/2."
For those who want to make withdrawals from IRAs and 401(k)s, McCain would tax the withdrawals at just 10 percent in 2009 and 2010. This is the lowest rate in the income tax code and would apply to the first $50,000 withdrawn. Under current law, income from retirement accounts is taxed at standard personal-tax rates.
As reported in The Wall Street Journal, "the Obama campaign questioned how making it easier to withdraw money from the market would stabilize the economy. If seniors are allowed to pay reduced taxes on their own withdrawals, 'how is that not capital flight, specifically for the wealthiest Americans who can move their money around?' asked Obama spokesman Tommy Vietor."
Obama, meanwhile, has proposed allowing Americans younger than age 59 1/2 to withdraw 15 percent of their retirement savings -- up to $10,000 -- without paying the usual 10 percent tax penalty, although they would still have to pay income taxes on the withdrawal. Countering critics who say waiving the penalty discourages saving, the Obama campaign argues that many Americans need the money to get by and should not be penalized when major financial institutions are getting bailouts.
Even before the recent economic turmoil, Obama's economic plan included a proposal to eliminate all income taxation of seniors making less than $50,000 per year.
For a CNNMoney.com article on the candidates' economic proposals, click here.
For a U.S. News & World Report blog entry on how Obama and McCain would change retirement accounts, click here.
Local Elder Law Attorneys in Your City
If you have an individual retirement account (IRA), now is the time to make sure you have been complying with tax rules. . .
Read moreThe terms 401(k) and individual retirement account (IRA) are bandied about quite a bit when discussing retirement planning, b...
Read moreA rule about how many IRA-to-IRA “rollovers” a taxpayer can make in a single years has changed and taxpayers shou...
Read moreMedicare is launching a pilot program to determine whether relaxing its payment rules can help patients who require nursing h...
Read moreIn addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.
READ MORETo be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.
READ MORESpouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.
READ MOREIn addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.
READ MORETo be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.
READ MORESpouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.
READ MORECareful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.
READ MOREIf steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.
READ MOREThere are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.
READ MORECareful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.
READ MOREIf steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.
READ MOREThere are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.
READ MOREMost states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.
READ MOREApplying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.
READ MOREMedicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.
READ MOREMost states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.
READ MOREApplying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.
READ MOREMedicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.
READ MOREDistinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.
READ MORELearn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.
READ MOREUnderstand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.
READ MOREWe need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.
READ MOREDistinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.
READ MORELearn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.
READ MOREUnderstand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.
READ MOREWe need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.
READ MOREUnderstand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.
READ MORELearn who qualifies for Medicare, what the program covers, all about Medicare Advantage, and how to supplement Medicare’s coverage.
READ MOREWe explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.
READ MOREFind out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.
READ MOREUnderstand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.
READ MOREWe explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.
READ MOREFind out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.
READ MOREGet a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.
READ MORELearn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.
READ MOREExplore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.
READ MOREGet a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.
READ MORELearn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.
READ MOREExplore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.
READ MORE