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Northwest Voices

Seattle Times letters to the editor

November 9, 2008 at 3:06 PM

Premature IRA withdrawals

Think about the future

There is a possible fix to the economy that would cost little, but must be addressed immediately.

The lives of millions of Americans are about to be severely impacted, unnecessarily, by the collision of a tax-code requirement with the collapse of the financial markets.

Due to the method used in determining the required minimum distribution of funds from IRAs [Individual Retirement Accounts] owned by people over 70 years of age, millions of retirees are being forced to withdraw an inappropriately large amount of their retirement savings this year.

Depleting already slashed retirement kitties by requiring withdrawal of funds, based on the value of their accounts as of Dec. 31, 2007, will impact their incomes for the rest of their lives, long after the economy recovers.

Unless there is an immediate suspension of the 2008 minimum required distribution from the IRAs of seniors, their future income will be severely affected. This anomaly will affect all seniors who, lacking company pensions, depend upon their own savings to supplement Social Security.

Short-term benefit to the economy is twofold. Allowing re-investment of funds already withdrawn from IRA’s into stocks at the bottom of the cycle would give the market a boost. And allowing seniors who will be withdrawing their required distribution in December to choose not to sell an overly large portion of their stock accounts at the very bottom of the market would also be beneficial to the markets.

Long-term benefit to the economy would be evident in that the nest eggs of millions of vulnerable citizens would not be prematurely depleted, leaving them short-funded and dependent on the younger generations to supplement diminished incomes for the rest of their lives.

— Mary O’Donnell, Seattle

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