401k and IRA changes coming in 2012

CONSUMER PARTICIPATION RECOVERY ACT, 2011 (CPR)

Fast Facts:

• There are an estimated 76 million Baby Boomers over the age of 55 years
• It is estimated that approximately 41 million are over the age of 65
• It is, therefore the case that approximately 35 million are 55 to 65 years of age
• There is a need for Disaster Relief
• There is a need for additional/increased​​ consumer spending

            As the recently retired Executive Director of the Montana Association of Counties I have been disappointed in the response to the financial crisis that arose in 2008. The actions taken by the government, in my opinion, did little by way of establishing consumer confidence and as a retiree I personally felt the impact with the loss of value in my retirement account and no one bailed me or the other millions of Americans who saw the value of their accounts diminish. I have spoken with our congressional delegation and have received little by way of a response from them.

With consumer confidence at an all time low it is proposed to establish what I have come to think of as "The Consumer Participation Recovery Act, 2011. (CPR) Very simply, it would provide a tax holiday by allowing each taxpayer to withdraw $25,000 from their retirement account prior to October 31, 2012 without the penalty for early withdrawal for individual 55 years to 65 or federal tax liability. An additional consideration would allow any tax payer to withdraw an additional $50,000 prior to October 31, 2012 from their "tax sheltered retirement account" to buy residential real estate without regard to the early withdrawal tax penalty or federal tax liability,

 I would appreciate a response with your considered evaluation of the "concept".

    Clifford Gordon Morris, Ph.D.

    1375 Beaverhead Road

    Helena, Montana 59602

What bothers me more than anything is the damn government constantly trying to use the tax code as a behavior modification tool.  To wit....

Government wants more houses sold, modify peoples behavior to entice them to buy a house via a tax credit. (home buyers credit)

Government wants more cars sold, modify peoples behavior by giving them a tax credit on certain kinds of cars if they'll turn in their old ones.  (cash for clunkers)

Government wants more people to save, then modify their behavior by enticing them to save in an IRA because of a tax deduction.

Government wants less people smoking, then tax that product more.

And it goes on and on and on.  Not to mention all the incessant regulations.

I don't need the damn putrid F#)*@$ government nanny state trying to micro manage every aspect of my life.

What I need is for them to get the hell out of my life. AND STAY THE HELL OUT!!!

Taxes are meant for, and constitutionally authorized for, one thing and one thing only, and that is to fund government.  Taxes are not authorized to be used as a behavior modification tool.

And it's way past time that it be stopped.

Yes...lets put more in there for the Banks and Wal Street to take like the last time...

Dear Mr. Morris,

Bravo.  Your idea is one of the first that I believe would lend some relief to senior citizens, who are making nothing on their saving because of low interest rates.  Where can I sign on?

And to dsopt.........I don't give a rat's a$$ what you do with yours, but I know I can handle my withdrawal in a way that benefits me financially.  And those who want to go to Vegas, well that's none of your fricking business, is it.

FYI for Mr. Morris

Avg. IRA balances per Google search (MSN won't let me post the link - thinks it is spam)

         Age        Amt

If the average 55-64 yo takes out 25K from their IRA it will leave an average of about 45K - that will unlikely provide much of a paycheck in retirement at 2.5% interest (~$1125/yr.).  Granted they will have other sources of income but I am more interested in improving my nest egg than stimulating the economy. 

As far as the tax free money to buy real estate that is an interesting proposition, but I personally am not interested in being a landlord buying a second property, (I am 51 years old) and live in a house I like that will be paid for in 2 years, so personally I have no interest in buying more real estate, but at the same time am worried that anemic growth rates will hurt my long term income.  A safer way to do this could potentially be to buy a REIT, but those took a nosedive along with the market in 2008 so nothing is without risk. 

All in all an interesting plan but once the politicians get a hold of it look out, who knows where it would end up.  Some people would probably go to Vegas and blow it. 

201K:

Wealth is a constant; the wealth destruction said it really did not exist. It every one 401K just doubled; would the return or expected return on the investments double, not its value? Its expected return should be its true value.