McCain makes new 401k proposal

Source: CNN

(CNN) – John McCain proposed suspending the requirement that investors begin dissolving their IRAs and 401Ks soon after age 70, his second major economic proposal of the week.

"We must also protect investors ­ especially those relying on their investments for retirement," McCain told the crowd at a campaign event in La Crosse, Wisconsin Friday.

"Current rules mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half. To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended."

Reporters did not get advance warning of McCain¹s announcement, which was not immediately accompanied by any further details from the campaign.

Read more: http://politicalticker.blogs.cnn.com/2008/10/10/mccain-makes-new-401k-proposal/

Think what would've happened if the whole shebang were privatized with Paulson's "non-reviewable" clause.

he'll be promising ponies

One evening as the sun went down and the jungle fire was burning
Down the track came a hobo hiking and he said boys I'm not turning
I'm headin for a land that's far away beside the crystal fountains
So come with me we'll go and see the Big Rock Candy Mountains

In the Big Rock Candy Mountains there's a land that's fair and bright
Where the handouts grow on bushes and you sleep out every night
Where the boxcars are all empty and the sun shines every day
On the birds and the bees and the cigarette trees
Where the lemonade springs where the bluebird sings
In the Big Rock Candy Mountains

In the Big Rock Candy Mountains all the cops have wooden legs
And the bulldogs all have rubber teeth and the hens lay soft boiled eggs
The farmer's trees are full of fruit and the barns are full of hay
Oh, I'm bound to go where there ain't no snow
Where the rain don't fall and the wind don't blow
In the Big Rock Candy Mountains

In the Big Rock Candy Mountains you never change your socks
And the little streams of alcohol come a-trickling down the rocks
The brakemen have to tip their hats and the railroad bulls are blind
There's a lake of stew and of whiskey too
You can paddle all around 'em in a big canoe
In the Big Rock Candy Mountains

In the Big Rock Candy Mountains the jails are made of tin
And you can walk right out again as soon as you are in
There ain't no short handled shovels, no axes saws or picks
I'm a goin to stay where you sleep all day
Where they hung the jerk that invented work
In the Big Rock Candy Mountains

I'll see you all this coming fall in the Big Rock Candy Mountains

of. McCain is crazy.

Most people don't have a wealthy spouse, and tax payer pensions and insurance

1) anyone age 70 who has a 401K heavily invested in stocks is not thinking clearly. Then again, McErratic himself, a decrepit 72, is an example of exactly how a 70-something might end up heavily invested in equity funds.

2) a 401K is a retirement fund. At age 70 something like 99% (number plucked from air) of 401K owners have to withdraw funds from their 401Ks on a regular basis in order to pay their bills.

3) McDunce is an idiot. That trollop running with him is even stupider, but not by much.

So no rush to start using that 401k money.

to help pay for prescriptions. My B-I-L look at his portfolio the other day and is seriously looking to return to work, the other postponed retirement. Both said they'll probably end up working for a living until they die.

and I'm actually sorry I wasted my time reading it.

... by propping it up with their retirement savings, when they should be able to retire and enjoy it. Lovely.

but I believe he's talking about the requirement that mandatory distributions be made from IRAs, 401k's & similar pretax pension savings plan, when an individual turns 70, whether the person needs to withdraw the money or not. I believe they established that so that federal taxes would begin to be paid on the funds at some point. (That's the case regardless of what the money is invested in.) He's not talking about having people wait until they turn 70 to access their money.

tied up in Wall Street anyway.

The general rule is (or at least has been until this past week) if you have 10 - 15 years until you expect to need your money, your best bet to beat inflation is to be invested in the market.

My father is in his mid-70s. His father died very unexpectedly when he was taken out when an oncoming semi veered left of center on an icy road. His mother died a little over a year ago at 101. He currently has no known health problems. Based on that, I suspect he's got 15-25 years ahead of him. If he doesn't have what he expects to live on from his late 80s to 100 or so invested in the stock market, he will lose against inflation.

It's not a smart choice for everyone - but it is for some 70 year olds.

they are giving advice based on a world where life expectancy might be 66 or 67 years old, in a world where many folks have a life expectancy into their 90s

of course a healthy 70 year old should have some of his (and esp. her) retirement in equities, otherwise, she will be destroyed by inflation if she plans to live much beyond age 80

right now there are no good investments, and it is a bad time to "cash out" and lock in losses that can never be replaced because the person is too old to get a good job back

this particular suggestion is actually a good one, and i don't see why it isn't something that both sides could not agree on, even tho it affects relatively few people (just those who turn 70and 1/2 in the next few months)

1. It was suggested by McCain - so it must be bad.
2. The mis-perception that only "wealthy" have 401(k) (or other retirement) plans with mandatory withdrawals at 70.5.

I think McCain's latest suggestion is a good idea.

But most of his suggestions are horseshit.

You can put more than stocks in a 401k!!

I didn't read the entire article but this is a very sensible proposal. Under current law if you have tax-deferred plans like a 401k or IRA you MUST begin to draw money out once you reach 70 or so. All McCain is saying is that that rule should be suspended so seniors aren't forced to sell stocks from their 401k or IRA when the value of those stocks has dropped significantly. It doesn't address how to get the stocks back on track but this idea is something that should be done.

After election I hope Barack convenes an economic summit...say Nov 6-7 with all the right players. This team needs to review all of the current programs and tools and identify what needs to happen next.

Seems to me like another scheme to protect the wealthy from having to pay taxes.

next question?

Anyone who needs the money can still take it out, but folks hitting the magic age who were fortunate enough to be able to save the amount they expected to need for their expected retirement (like my parents who are in their mid 70s) should not be forced to start (or continue) distributions under the current economic situation if taking the distribution would require them to sell off stock/mutual fund investments.

To address the suggestion posed by other posters that no sane 70 year old would be invested in the stock market, my parents' parents, with one exception, lived to see 88-101. The 88 year old was quite healthy when he was taken out by a semi driver who veered left of center on an icy road - and would likely otherwise have rivaled his spouse's 101 year life. With the expectation that the funds would need to last 10-25 years beyond their current age, it is not unreasonable for my parents to still have at least some portion still invested in the stock market.

Or something like that.

But then again if they did that, people would totally cash out.

Not only have retirees who need the money now seen their net worth crushed, but they still have to pay taxes on what they withdraw. This tax should be eliminated, or suspended, for the first $20,000 or $25,000 dollar yearly withdrawal until the Dow recovers to let's say 12,000. After all, it was government policy that steered everybody into mutual funds to begin with.

That's the Democratic way of doing it. McCain's the Republican way: let the rich sit on their nest egg until it recovers its value while the less well-off sell cheap and pay the taxes.

Depending on your other income, your withdrawals are taxed as ordinary income. The first large chunk of your income is tax free (you deduct your standard deduction and personal exemptions from your income before what is left is taxed).

let's bring back employer-sponsored pensions and then 70 year olds won't have to worry about losing their retirements in the stock market.

401ks have been a scam. Pensions were a much better deal.

Bring back guaranteed employer-sponsored pensions is right. The 401(k)'s have become 4.01(k)'s--the (k) standing for (k)aput!

How many retired 70 year olds have 401Ks I wonder? 50%... 25%... 12%...

Oh, they mean the one about the gov't buying up the bad mortgages. Turns out he stole that one from another Senator who lobbied to have it included in the Bush/Paulson bailout package -- none other than Barack Obama himself!

So that one doesn't really count.

edit: caps

considering that it is actually a good idea

however i can look at an actuarial chart and figure out that MOST people will outlive their ability to be hired to do a job that pays beans and MANY will outlive their ability to work at any job

obviously if you have the magical psychic power to know in advance that you will drop dead while still young and healthy, then you don't have to be concerned about saving for retirement and you are welcome to blow all of your money now

we don't have to shout down a good idea merely because a stopped clock is right twice a day

this is a good idea, both sides should adopt it immediately

the age of 70 and 1/2 was the age chosen under ronald reagan to force distributions from (401)ks so that people would pay taxes on the earnings at some point

He was too old to build much of a 401-K though his retirement pay was reduced. So, he's still working and would not like to spend from his now even smaller 401-K. And, his pension, though reduced, is a fixed benefit until he dies. No increases, no cost of living raises, nada.

is transfer that amount electronically from his fund in his 401k to that same fund in an account he sets up outside of his company. He can set up an account in Scottrade or wherever, and transfer that 4% withdrawal over to that account electronically, and buy into the same mutual fund he took it out of in his 401k.

And he won't be paying those high fees in his personal account that he was paying in his 401k.

The bad news is that those withdrawals will be taxed as income, whether he spends it or keeps it in his personal account.

in the last 8 years. Job loss and a FIL who had the magical psychic power mentioned pretty much killed any retirement planning. It's more likely, the way things stand now, the Widows Home and the $40 a month Medicaid stipend after forking over any assets to the Fed/State, so I too may as well die early or spend whatever loot comes my way. If I don't, I may end up in a bedroom cell w/one of my lazy, slobby kids (sure glad I discovered just how they lived now, eek! and ugh!) where I'd probably die of some acquired infectious disease anyway.

Older boomers, close to full-benefit SS retirement now, who have experienced bankruptcy/foreclosure of their homes and CONTINUED poor job prospects (IT won't be coming' back?) won't have time to recoup much of a retirement. They'll be loathe to return to school for retraining if it means more personal debt, and loathe to work like dogs only to be disqualified for elderly financial programs. Buying a big insurance policy and finding that semi that will roll you over would be a better option than how one will live otherwise.

The FIL lived to age 86, but being a child of the Great Depression and a Vet who failed to access all the wondrous benefits bestowed on those WWII guys, outlived the proceeds of his tiny ranch home, cash, and small amount of company stock. Near the end, his mind was clear enough that he knew $40 wasn't going to go far for living expenses, but without coughing it all up, he did not qualify for skilled nursing care or cancer hospice (not cancer) by virtue of a reasonable company pension and SS income. However, he did need round-the-clock sitting services since he had a tough time communicating (deaf), couldn't remember to take medicines correctly, and had a hard time ambulating, though he could run appliances like microwaves and washing machines and, of necessity, began to bathe, however poorly, all by himself via sponge baths from the sink instead of showers/baths. In his case, living longer required scrupulous personal hygiene and thrice-weekly dialysis without complications like sepsis and dehydration.

I am a firm proponent of defined benefit pensions (the old kind, not the cash balance nonsense), BUT

given that we are stuck with 401(k)'s, we need the following:

We need a way that while you are still working for a company to periodically roll all or part of your 401(k) over to an IRA. You can do this now IF you retire, leave, or get fired. Companies already have a mechanism in place for doing this rollover.

The company chooses the funds that are available for your 401(k). It would be nice, for example, right now to move money out of your 401(k) into an FDIC-insured CD IRA. (Some may also want to move it to an IRA to have access to a wider number of investment opportunities that are not available as 401(k) plan choices.)

THIS IS OUR MONEY. It should not be held captive in a 401(k) plan -- we should be able to periodically move it into something else if we want. We should not have to live with the choices the company makes.

The availability of in service distributions should be REQUIRED for any 401(k) plan. I read somewhere that 401(k) plans can legally do this now-- but the plan has to allow it.I doubt many plans do (ours doesn't).

If we are stuck with 401(k)'s then we should be able to move our money out without having to leave the company.

you need to sit down with your human resources guy or if it's a small company the guy who handles the benefits package (at my husband's company it's just a guy) and he or she will explain to you the many choices you have for your 401(K) including cash type investments like money markets, CDs, etc.

the problem with the cash type investment is that, well, we live too long and are educated and fit enough to work too short, you will find that if you have over-invested in the cash-type "safe" investment that you lose too much to inflation and you never get enough to retire

with equities there is some gambler's chance that if you retire at the right time, you'll end up with enough

with CDs there is no chance when you're talking about an investment horizon of a decade or even multiple decades

the plan allows people to pick these kind of investments, the trouble is that 25 years of 401ks has shown us that people who pick these kind of investments never accrue enough money to be able to retire -- hence the reason why people migrated to equities in the first place

be my guest, put some money in the cash type investment in your 401k/IRA and watch how it (doesn't) grow, but don't you understand that people older than you have already tried this? 401Ks go back to reagan, we have a lot of experience w. this now

the real problem is that guaranteed investments lose to inflation because you have to pay a price for the risk reduction -- nothing in life comes for free

it's a structural problem and, at the end of the day, an argument for protecting social security and medicare very strongly

I just went through evaluating plans for the company I work for. The best plan we could find was excellent, offering a wide variety of investment options in solid well respected fund families, with very low out of pocket costs, and middle of the road principal-based costs. The only weak point was that its "guaranteed" income fund was guaranteed by an insurance company. Granted, none of these "guaranteed" income funds have ever failed - but with the near failure of AIG, who knows whether that trend will continue.

Unfortunately, even though all the employees agreed on the plan, that "flaw" seems to be the barrier to the company adopting a 401k (well that, and now the state of the economy - we'll probably never get one now).

And as an employee, you have no say over what the company chooses, unless possibly, you have a collective bargaining agreement that allows input as to plan choices.

<edit> I've spoken to people at different companies who say their choices suck and would LOVE to be able to get their money out. It's not just our plan that people want out of.

I want my money (first) in a 401(k) or other retirement plan - where my daughter's college doesn't think it's fair game to require me to spend before they will give her financial aid and (second) in an indexed fund within a retirement plan.

I don't thing a fund that isn't really guaranteed should be allowed to call itself guaranteed - but since I did not plan to use that option, it doesn't particularly concern me. In my case, it is just one more excuse for the employers who have no intention of investing anyway to not offer the plan that everyone else in the office is desperate for.

Read the fine print. I'll bet there is a disclaimer that it's not really "guaranteed".

That is why I know it is not guaranteed. My point is that in advertising the investment options you should not have to read the fine print to find out that guaranteed income does not really mean guaranteed. Just like you can't label something juice that isn't really juice.

And I don't have that right now as an option. But I could have it IF I had the ability to roll a 401(k) over to an IRA without having to quit.

<edit> I shouldn't have to quit to get MY MONEY out.

I'm stuck with whatever I can sock away in an IRA.

but yes - 401(k) plans should offer a true guarantee on at least one investment vehicle.

Our plan doesn't have it.

And if you are nearing retirement, you may very well want to put your money in FDIC-insured CDs--or at least some of it.

Or what if you want to put your money in gold or precious metals right now and your plan doesn't have that investment choice -- or foreign currencies.

If you have the ability to roll it over to an IRA you have all sorts of investment choices available to you. We should not be restricted to the choices that a company chooses for us. It's OUR MONEY.

We have a money fund account, but it is meant to hold $ temporarily, since its fees are MORE THAN the return it pays. Other than that, it is 100% funds: two bond funds, the rest are equity mutual funds.

One thing we DO have is a self-direct portion, where you can buy from a larger set of mutual funds. And you can buy individual stocks (with a hefty buy fee). But still no CDs or savings account. It is an investment firm that holds your money, not a bank.

I think a lot of people would be concerned if they really looked-- and they would try to get their money out ASAP.

The fact that an investment firm is in charge of OUR MONEY is the problem. I don't necessarily want the investment firms that a company chooses for me. I don't necessarily want the FUNDS that the company chooses for me. I don't necessarily like the FEES that the funds in the plan that the company chooses for me.

<edit> If it's OUR RETIREMENT MONEY, why should it be held captive in a plan run by an investment firm that WE DIDN'T CHOOSE?

be Schwab or Merrill Lynch (ML is mine) or whoever the other investment firms are.

The funds are standard mutual funds, though, not necessarily ML funds. They are from other houses where they've made some sort of deal with 'em (in my case, the funds are American Funds, Blackrock, Pimco, Davis).

I agree that we shouldn't be forced to do 401k plans, which is what we are, if we do anything at all. My company offers a 401k plan, so I am not allowed by law to do a deductible IRA on my own, instead of the 401k. I CAN do a Roth IRA, but the limits of contributing to that are strict. It is, at best, a supplement to a retirement account. It can't be considered a retirement account all on its own.

It sucks.

That's why people should be able to roll the money out into an IRA -- you might be able to invest in Vanguard funds (or something else) that have lower fees.

We should be able to get our money out -- it's OUR money and we should not have to keep it locked up in a 401(k) plan over which we have NO say as to investment choices and the fees that are charged.

there may be an exception if the worker makes below $42,000 or something. Not sure about that.

But I checked into it. If your company offers a 401k, most workers MUST use that 401k instead of a deductible IRA on his own outside of the co. That is to force workers to use the 401k, I guess.

need his 401k, period.

Besides, investors don't have to sell everything in the 401k all at once. I think the govt mandates ONLY that the investor must start withdrawing a certain percentage every year. 4%? And all the investor would have to do, if he doesn't need the $, is transfer it out of the 401k and into the same mutual fund OUTSIDE OF the 401k.

This is a puzzling recommendation. I don't trust him.