Treasury Failed To Help Out Seniors When It Could
The Treasury last year failed to help ease the financial burden on seniors. It could have been able to help but acted to late. The incident dates back to last year November when two senior respected members of Congress asked Henry Paulson to reduce the pressure on senior taxpayers. Henry Paulson is the Treasury Secretary and he was asked to suspend for 2008 the statutory requirement that seniors over 70 ½ withdraw a certain sum out from their IRAs, 401 (k)s as well as similar tax-deferred saving plan or meet with stiff penalty.
Why the suspension of this requirement was very necessary was that the amount to be withdrawn was based on the people’ age and the estimated value of their savings plans as off December 31st, 2007. However back then the stock market was still high up. Markets now have dropped to an all time low. For seniors to meet up with this requirement they were forced to sell their equities at huge losses as high as 40% to cover the withdrawal.
When the congress men suggested the suspension of the requirement, lawmakers of both parties agreed it was a good idea and endorsed it. Back then there was still plenty of time to act. The Treasury Secretary was busy spending billions to save distressed banks. Paulson thus delayed action until middle December by which time it was much too late. Most distributions had already been done to meet up with the December 31st 2008 deadline.
By December 17th, a Treasury official said that it was already too late to effect the suspension. A suspension at that time would be “complicated and confusing”. Millions of seniors and account holders in retirement had their tax deferred savings diminished and had to pay taxes on withdrawals they forcefully had to make. If the rules had been suspended as suggested by the two congressmen it would have saved them from having to pay even higher premiums in 2009.
The amount they would have to pay in 2009 will be based on the value of their equity as of 31st December 2008. A suspension at this time would mean little because the market was at its lowest at 2008. Seniors can only hope that the market picks up and even soars so that they can recover part of what they lost because of the Treasury’s delayed action. Until then taking out a reverse mortgage loan on your home might be a great option.
