we need to fix problems with the way early distributions for these 401ks and IRAs are assessed tax penalties.
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=7261257
These rules need changing, as when more and more people get their savings wiped out with the current economy's climate, they are being forced to dip in to their retirement funds (401k and IRAs) as their only assets to live on at times. And they are being socked with an extra 10% penalty that only those who really need to get this money and are least able to afford this tax are having to pay. Something should be done about these penalty taxes. Yes, perhaps we need some other mechanism to have people keep their money in these retirement funds, or move them in to something else better than 401k or IRA for retirement, but perhaps to keep incentives for people to not cash them out by removing this penalty, we replace it instead with a financial INCENTIVE to keep your money in these plans, or find some other program that is perhaps taxed very low ultimately income tax-wise, if they keep it until retirement age, that one can move it to and that one can roll over to at any time, not just when one is unemployed.
Then if people need early distributions, they might pay regular income tax as if it was just income (which it was when they put that money in to these funds), and not taxed extra, which at the time they put it in, they had way of anticipating that we'd have the financial mess that we have now that they worried about the early distribution penalties then.
Yes, we need to help encourage people to put away money for retirement, or fund social security so it can provide sufficient retirement for everyone. But we shouldn't put extra penalties on people forced to use these funds now to survive. Those collecting these penalty funds love the extra dollars, whether it is government, or those in business getting all of those extra maintenance fees over the years, but it is just wrong that those who suffer the most are having to pay that tax. Just one more way the middle tax is getting screwed today.
We should restore people's income and wealth to the point that they don't feel the need to rob their retirement funds just to survive today.
= new reply since forum marked as read