McCain: Suspend mandatory stock sales for retirees

[CubanMustGo]

This seems like a decent idea. I'm sure someone will tell me why it isn't ... please try not to use "because McCain said it" as the reason.

http://blogs.wsj.com/washwire/2008/10/10/mccain-calls-for-suspending-rule-on-retirement-accounts/


John McCain called for suspension of the requirement that retirees must begin liquidating their retirement accounts when they reach age 70 and a half, the latest economic policy rolled out by the Republican presidential candidate.

The Arizona senator announced the plan at a rally Friday morning in La Crosse, Wis. Buried a third of the way through his typical stump speech, McCain said his priority was to “protect investors – especially those relying on their investments for retirement.”

“Current rules mandate that investors must beginning to sell off their IRAs and 401Ks when they reach age 70 and a half,” he said. “To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended.”

Dallas Salisbury, president of the Employee Benefit Research Institute, says similar proposals have been put in front of Congress over the years but have not passed because it would help only a portion of the retired population. “The vast majority of individuals have relatively small account balances,” he said. “So for more individuals, they would have had to started taking the money out long before (age) 70 ½.”

McCain’s proposed suspension is aimed at wealthy retirees, individuals who have enough other forms of savings that they do not need the money in those retirement accounts, he says.

Suspending that part of the tax code would benefit “high pension or high-net-worth individuals,” Salisbury said, that allows them to live beyond the cut-off age “without even needing any of the money in an account to help support them.”

The U.S. tax code requires Americans to begin withdrawing a percentage of the funds in retirement accounts at the age of 70 and a half, or if they are still working at the age, at the moment they retire. “There is no reason to force the unlucky few who find themselves currently hitting this mandated timeframe to sell holdings at a time when our stock markets are in turmoil,” a statement from the McCain campaign said.

The campaign’s economic policy director, Doug Holtz-Eakin, said the proposal is a temporary suspension. Holtz-Eakin said that when McCain, who is 72 years old, heard about the requirement to begin liquidating assets, he said, “We should stop that right now.”

The weakened economy has hurt McCain in the polls. The Gallup daily tracking poll shows a big hit for the candidate came when he announced the suspension of his campaign on Sept. 25. In the 16 days since then, he has consistently lagged behind rival Barack Obama by at least four points. The latest survey, released Friday, showed a 10-point spread between the two.

[KenMcCoy]

Because it only benefits those people who worked hard and saved money for their whole life.

-dems

[CubanMustGo]

Because it only benefits those people who worked hard and saved money for their whole life.

-dems

Could do without crap responses like this, too.

[KenMcCoy]

Could do without crap responses like this, too.

OK...on the serious side then. This is a good idea, and I think it will help out some retirees. But, as it says in the article, this will only help those who don't really need the money since most have to dip into their 401s and IRAs every month to pay the bills.

[ChumpDumper]

What 70 year old is still playing the market with his retirement money?

[KenMcCoy]

What 70 year old is still playing the market with his retirement money?

My father is...and he's 78.

[Anti.Hero]

What 70 year old is still playing the market with his retirement money?

When you have 500k,750k,2 mil,etc and the market is hitting 8-10% constantly it is probably too tempting for many.

The last 5 yrs+ (heading to 60) is when the compound interest sky rockets for many.

[CubanMustGo]

What 70 year old is still playing the market with his retirement money?

I know my FIL has a substantial amount invested in the market, and he's past 70.

[SpursFanFirst]

What 70 year old is still playing the market with his retirement money?

I JUST got off the phone with my Mom and she mentioned that my grandparents moved money out of their stocks today.

Of course, they have their money in mixed accounts, but they still had some in stocks.
My grandpa is 84, and I'm not sure about my grandma.

They've been simply living off the dividends for years now. I think since they retired.

[ChumpDumper]

Is it the money specifically set aside for retirement? The whole point of the retirement plan is to live off that money after you retire. If someone wants to gamble other money on stocks there's nothing stopping them. Most of that retirement money should have been moved to less risky investments long ago.

[clambake]

it's not a bad idea. i wonder if this is to offset his suggestion of cutting medicare and medicaid by 1.3 trillion. both suggestions hit the same target.

[SpursFanFirst]

Is it the money specifically set aside for retirement? The whole point of the retirement plan is to live off that money after you retire. If someone wants to gamble other money on stocks there's nothing stopping them. Most of that retirement money should have been moved to less risky investments long ago.

In my grandparents case, I'm pretty sure it was their retirement money. They said they were moving it because they couldn't "afford" to let it ride in this market.

Like I said though, they have a really good mix of accounts at this age....some money just happened to still be in stocks.

[ChumpDumper]

Right, the percentage of their money in stocks should have been close to zero for a long time -- in which case, this law change would be unnecessary. I imagine avoiding the market's volatility in retirement is precisely why the rule exists in the first place.

[Findog]

SENATOR McCain can introduce this legislation in January when the new Congress convenes.

[2centsworth]

If we want to raise more tax revenue long-term, and then suspend the rule.

As far as Chumps theory, well in theory yes, but this year AAA rated bond portfolios are down double digits in some cases. Shoot, even a Money Market Fund lost money this year.

And FYI, a 100% bond portfolio is riskier than a 80/20 portfolio.

[ChumpDumper]

It's not theory, it's basic financial planning. I'm not even talking about bonds. Why do you think they call it risk?

[ducks]

What 70 year old is still playing the market with his retirement money?

LOT OF PEOPLE ARE
IN YUMA 150K OF THEM COME HERE
AND LOTS OF THEM USE THE COMPUTERS TO SEE WHAT THEIR STOCKS ARE DOING

[Anti.Hero]

Or (if relatively young) you could just set up a rothIRA and not worry about the withdrawal enforcement later down the road.

[ChumpDumper]

LOT OF PEOPLE ARE
IN YUMA 150K OF THEM COME HERE
AND LOTS OF THEM USE THE COMPUTERS TO SEE WHAT THEIR STOCKS ARE DOINGIf they left a large percentage of their retirement money in the stock market after they retired, they were taking a taking a pretty big risk.

[2centsworth]

It's not theory, it's basic financial planning. I'm not even talking about bonds. Why do you think they call it risk?

I'll try this with you one time. You said elderly people should be out of stocks and into less risky investments. You surely aren't saying basic financial planning suggest they should be 100% under the mattress, so I have to assume you were talking about traditional alternatives to stocks like treasuries, commericial papers, CDs, and AAA bonds. well, those traditional investments for the most part have lost value this year.

[Wild Cobra]

Well, I think if someone is still invested heavily in stocks at retirement, they were foolish. However, I always considered the madatory liquidation of retirement funds foolish as well.

[2centsworth]

If they left a large percentage of their retirement money in the stock market after they retired, they were taking a taking a pretty big risk.

what does basic financial planning theory suggest as an alternative?

[2centsworth]

Well, I think if someone is still invested heavily in stocks at retirement, they were foolish. However, I always considered the madatory liquidation of retirement funds foolish as well.

it all depends. How about someone who's elderly and doesn't need the money and is investing it for their grandchildren.

[ChumpDumper]

Gee, do you know of anything that is more secure than bonds?

Something with a guarnteed rate of return?

Something insured by the federal government?

If only something like that existed in this crazy world....

[2centsworth]

Gee, do you know of anything that is more secure than bonds?

Something with a guarnteed rate of return?

Something insured by the federal government?

If only something like that existed in this crazy world....

so are you saying basic financial planning theory states they should invest 100% in money markets or CDs? Have you ever heard of the concept of losing mone safely? doesn't matter, your basic premise is right.:toast

[ChumpDumper]

The whole point of retirement is to live off the money you have saved, not to try to maintain the rate of growth you achieved while you were still working. So yes, a whole lot more of your money should be in CDs and the like once you retire.
Have you ever heard of the concept of losing mone safely?Well, if you had money in an Dow index fund, you would have lost 18% of your money this past week. How much did any one senior's CD lose last week?

[2centsworth]

The whole point of retirement is to live off the money you have saved, not to try to maintain the rate of growth you achieved while you were still working. So yes, a whole lot more of your money should be in CDs and the like once you retire. you have to scale down on stocks, but as I mentioned earlier a 20% allocation reduces risk. also, within that CD spectrum diversification into munis, if outside the IRA, or AAA bonds will also reduce long term risk and help keep up with inflation. Thus, a properly diversified age sensitive portfolio would still have some problems in this market, so if the government wants to give people a break on the RMDs sobeit.

[Wild Cobra]

it all depends. How about someone who's elderly and doesn't need the money and is investing it for their grandchildren.
Then it shouldn't be in a retirement account.

[Anti.Hero]

Then it shouldn't be in a retirement account.

Tax free money, at least a roth.

[vna411]

who cares about the post. this is the nba re tart. and it is all about this baby,:lobt2:

[2centsworth]

Then it shouldn't be in a retirement account.

tax-deferral is a beautiful thing, unless you believe investors should pay higher taxes?

[ChumpDumper]

I like the Roth idea if you want to keep playing the market after you retire. Still, this like so many other stories surrounding the crisis were born from the thinking that the economy and markets could never stop growing.

[2centsworth]

I like the Roth idea if you want to keep playing the market after you retire. Still, this like so many other stories surrounding the crisis were born from the thinking that the economy and markets could never stop growing.

it's grown since the great depression and should continue to do so, but we are in serious tough times. hopefully this is a blessing in disguise and we will open our eyes to the medicare crises ahead.

[Wild Cobra]

tax-deferral is a beautiful thing, unless you believe investors should pay higher taxes?
Roth has it's advantages depending on income class.

Still, if the intent is to have retirement money, less money should be in stocks as you get older because of thier volitility.

This isn't something I wish to take too much time on. I made my relavant points in my first posting. I'm for changing over to "THe Fair Tax" anyway. It would take away the advantages with a ROTH account if it were to pass.