Bailing Out Seniors
Posted at 9:26 am on Wednesday, October 15, 2008, in Uncategorized, and tagged 2008, economics, mccain, obama.
This is probably going to rain on a few parades.
Aren’t the plans set forth by John McCain* and Barack Obama to protect seniors from mandatory withdrawals for their IRAs or 401ks (after age 70, or 59 in the case of McCain’s lowered tax rate on any withdrawals from retirement accounts) actually nothing more than another bailout, except in this case, the bailout would help seniors and not Wall Street investment bankers?
Now, do not get me wrong. I would support the elimination of such a rule — and a reduction in associated taxes — but the plans put forth by the Obama and McCain campaigns will only allow such for the next six months or the next two years, or to prevent losses “when the market is in the tank,” as Obama said.
If you are over 70 years old, and are required to make a minimum withdrawal from your tax-deferred savings vehicle, and you are not selling much more secure bonds or T-bills or CDs (that are mostly uneffected by the current market conditions), then are you simply not diversified enough for retirement. If you are retired — and over the age of 70 — and you are forced to sell stocks and mutual funds in this down market, then your investment strategy assumed too much risk.
Isn’t it fair to compare this scenario — has anyone calculated how widespread this problem actually is? — with those that took out risky mortgages, assuming that their home prices would continue to climb, effectively paying for their deepening lines of credit?
A bailout is a bailout, and this is a bailout. I would favor the elimination of the rule altogether, as I said, but not for just the next six or twenty-four months; that makes it a bailout.
* By the way, McCain’s plan to cut the capital gains tax rate — from 15 to 7.5 percent — for only the next two years, is supremely rich, especially since the argument that it “would provide an incentive to save and invest” is an incredible falsehood (and really raises the question of McCain’s understanding of the economy). Why would you save money — by investing in the stock market — if it is cheaper to sell and get out of the market now? Ridiculous.
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October 16th, 2008 at 7:04 pm
I believe you have the incorrect terminology: this is clearly a “rescue plan,” just like the $700 billion promised the banks, the mortgage companies, AIG, and so on.