How About Tax Free IRA Withdrawals?

[seashoreCM]

Instead of more federal grants to pay laid off employees during these trying coronavirus times, would anyone favor triple* tax free withdrawals/distributions from individual retirement accounts and Keoghs and 401K plans at any age?

* Not taxable or reportable income for federal, state, or local purposes.

 

[HerRoyalHighness]

That's a last resort option that should just be left alone. People are already treating their homes as ATM's. Tax free, no...a lot of that savings pretax. What gets people is the withdrawal penalty.

 

[seashoreCM]

... What gets people ...

Doling out relief funds shows up in this year's federal budget; specifically declaring the withdrawals tax free and waiving the penalties does not.

 

[mikehn]

Great points all around, but I wouldnt want to withdraw anything out of retirement funds unless absolutely necessary at this point. Two weeks ago yes, but not right now.

 

[mnrose]

Bad idea. Many (if not MOST) Americans already lack too little in retirement savings. Encouraging them in any way to take it is going to make THAT problem much worse.

 

[MarkLT1]

Bad idea. Many (if not MOST) Americans already lack too little in retirement savings. Encouraging them in any way to take it is going to make THAT problem much worse.

Absolutely.. it is a classic "Those who need it most, likely wont have it" scenario.

 

[DopeyDame]

Absolutely not.
Withdrawing from 401ks now would be fool-hardy for most who have lots of money in stocks. It would discourage retirement savings which is still just as important as ever. And it would provide no relief at all for the many lower-income workers who don't have 401ks anyway.

 

[JimMIA]

I agree that it's a bad idea. It would victimize the dumbest among us by encouraging them to withdraw money they don't have enough of, it would provide only a little relief for those who withdrew, and would do nothing for people who really need help.

It's kinda like the idea of reducing or eliminating tax withholding. Sure it would increase your paycheck, but then you'd have to pay more at the end of the year. No point to that, and those tax withholdings are taken out for a reason -- that money is already spent.

 

[NotUrsula]

No. Very few minimum-wage earners have 401K savings at all, and anyway, putting the burden of this on individuals who have very little to fall back on isn't the answer.

Small businesses will need immediate help so that they don't go under, but larger businesses can and will take any losses of this kind as write-offs. It's time to step up and be good corporate citizens. Take the loss, boss, and be thankful that you're in the lucky position of not being homeless if you don't get enough hours.

 

[wvjules]

The people that are going to need the relief the *most* do not have retirement savings to borrow against. Nor will they have a paycheck for a payroll tax cut if they are not working.

 

[Dan Murphy]

As a senior, I would like it if they lifted the RMD requirement for a year, like back in 2008.

 

[Tinkerdreams]

Actually this wouldn’t be a bad idea but they would need to cap the amount that could be withdrawn.

 

[BillSears]

So I could pull it out of IRA/401 K. Pay no taxes. Then reinvest in a Mutual Fund?

 

[Cannot_Wait_4Disney]

Those that are going to need help the most are also the least likely to have 401ks with substantial money to withdraw in them. And those with the most money in them are probably going to actually need to be taking it out the least. The payroll tax cut idea suffers the same problem. Those that lose their jobs need help the most. They aren't going to be helped by a payroll tax cut.

 

[Farro]

Those that are going to need help the most are also the least likely to have 401ks with substantial money to withdraw in them. And those with the most money in them are probably going to actually need to be taking it out the least. The payroll tax cut idea suffers the same problem. Those that lose their jobs need help the most. They aren't going to be helped by a payroll tax cut.

Selfish me would love a payroll taxcut.

But I know it wouldn't help those who will need immediate relief.

 

[tvguy]

Instead of more federal grants to pay laid off employees during these trying coronavirus times, would anyone favor triple* tax free withdrawals/distributions from individual retirement accounts and Keoghs and 401K plans at any age?

* Not taxable or reportable income for federal, state, or local purposes.

Lord no. People are stupid enough with their money as it is without allowing them to squander what little they have saved in retirement accounts.

 

[georgina]

Instead of more federal grants to pay laid off employees during these trying coronavirus times, would anyone favor triple* tax free withdrawals/distributions from individual retirement accounts and Keoghs and 401K plans at any age?

* Not taxable or reportable income for federal, state, or local purposes.

It would be great for us, but we are already retired, so I would just be reallocating it to other investments. IRA withdrawals are already state and local income tax free here in PA (we had to pay those taxes on the money we put into the IRA, I know some states do give a deduction but not ours).

 

[tvguy]

It would be great for us, but we are already retired, so I would just be reallocating it to other investments. IRA withdrawals are already state and local income tax free here in PA (we had to pay those taxes on the money we put into the IRA, I know some states do give a deduction but not ours).

That's too bad. You probably were in a much higher tax bracket then than you are now.

 

[georgina]

That's too bad. You probably were in a much higher tax bracket then than you are now.

PA is a flat tax from first dollar (3.07%), no deductions or exemptions, so it doesn’t matter. Local tax was flat 1% on income. We are getting a bit of a break because I am paying no state or local tax on the IRA earnings when we withdraw, and none on DH’s pension either.

 

[Colleen27]

I think that, like the payroll tax holiday idea, it would benefit the haves and do nothing for the have nots. Not many part time, low-wage or gig economy workers have IRAs or 401ks to withdraw from, and even those that do are likely not saving enough to see them through retirement. Turning those funds into emergency savings now does nothing for people who don't have them (or don't have much), and merely postpones the financial pain of this situation to a time in their lives when they're likely to be even less able to absorb the blow.