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Would waiving penalties and taxes on 401(k) withdrawals help the middle class?
Posted on 3/23/20 at 10:01 am
Posted on 3/23/20 at 10:01 am
Say you waived the penalties associated with an early withdrawal and/or didn’t tax it as income for the year 2020. Wouldn’t that help the middle class (maybe only upper middle class) if they need it, and save the government some stimulus money?
Was that ever on the table?
Was that ever on the table?
15
Posted on 3/23/20 at 10:02 am to boosiebadazz
Why would anyone want to withdraw their 401(k) right now? This should not be encouraged in any manner...
Posted on 3/23/20 at 10:02 am to boosiebadazz
quote:
Was that ever on the table?
You mean, did the government take a logical, pragmatic approach, to determine the best way to help those out of work or needing money?
Posted on 3/23/20 at 10:02 am to boosiebadazz
Would have to be a limit, but yeah this is not a bad idea. If they make it open ended, I am pulling all of my inherited IRA out ASAP and investing it as I see fit.
Posted on 3/23/20 at 10:03 am to boosiebadazz
With the market down like it is, you're already taking a loss if you take anything out, even without penalties and taxes.
Posted on 3/23/20 at 10:03 am to boosiebadazz
quote:
Say you waived the penalties associated with an early withdrawal and/or didn’t tax it as income for the year 2020. Wouldn’t that help the middle class (maybe only upper middle class) if they need it, and save the government some stimulus money?
The government would love that , I am surprised they haven't suggested it.
They don't like people saving their own money.
Posted on 3/23/20 at 10:04 am to The Maj
No one would want to. It would be a backstop emergency fund. And it would lessen the stimulus from taxpayer dollars, cause some belt-tightening, and you’re right, the realized losses would disincentive withdrawal but for the most dire circumstances.
Posted on 3/23/20 at 10:07 am to boosiebadazz
This would be awesome for me. Take the entire 401K and immediately roll it over to a Roth so it would be tax free forever. Who wouldn't do this?
Posted on 3/23/20 at 10:07 am to boosiebadazz
i thought about this last week when things were tumbling (as a "it may cost me less to pull out now with the taxes/penalties than to leave it in"). i think the problem is the optics and it seems like you're bailing out "the rich"
Posted on 3/23/20 at 10:08 am to boosiebadazz
Wouldn’t that crash the stock market even more?
Posted on 3/23/20 at 10:08 am to The Maj
quote:
Why would anyone want to withdraw their 401(k) right now?
people are about to run out of money
Posted on 3/23/20 at 10:09 am to boosiebadazz
That's stupid especially right now with the way the market is. Plus you can take a 401k loan if you have that much in 401k.
Here is an idea,How about they stop collecting payroll taxes like trump suggested? That was the best suggestion of any so far by a wide margin.
Here is an idea,How about they stop collecting payroll taxes like trump suggested? That was the best suggestion of any so far by a wide margin.
Posted on 3/23/20 at 10:10 am to boosiebadazz
quote:
disincentive withdrawal but for the most dire circumstances.
Then why remove the penalty and make it a more attractive option?
Posted on 3/23/20 at 10:12 am to SlowFlowPro
quote:
people are about to run out of money
I bet not many with 401(k) are about to run out of money...
At least not enough to warrant the removal of penalties for withdrawal...
Then when this is over, the government will want to bail out the folks that cashed their retirement savings in...
Posted on 3/23/20 at 10:13 am to The Maj
quote:
Then why remove the penalty and make it a more attractive option?
Right. Normal hardship withdrawals are penalized, why would this be any different?
And a hardship withdrawal is the only was an employed person that would be penalized is able to take the money out in the first place.
Posted on 3/23/20 at 10:15 am to The Maj
quote:
I bet not many with 401(k) are about to run out of money...
i bet you're very wrong. their excess goes to things like debt and 401k. i imagine most american families have very thin margins
i seriously doubt many can go 3+ months without income without dipping into investments
Posted on 3/23/20 at 10:16 am to boosiebadazz
That's actually a good idea. Ease the hardship provisions and add a special one for this circumstance.
Posted on 3/23/20 at 10:17 am to Bunk Moreland
quote:
That's actually a good idea.
agree 100% (and i don't have a 401k)
the problem is that for a HUGE chunk of the country, they will see it like this:
Posted on 3/23/20 at 10:19 am to boosiebadazz
I suppose they could do that but I would strongly discourage anyone from doing so unless there was really no other option. As was already mentioned, now would be about the worst time to be pulling from your 401k, penalties or not.
Posted on 3/23/20 at 10:19 am to The Maj
quote:
Why would anyone want to withdraw their 401(k) right now?
My husband is retired and we do rely in part on an income stream from our 401(k). But not now We'll live off my paycheck and his SS and until things get back to normal
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