Obama Wants Looser 401(k) Distribution Rules

October 13, 2008 (PLANSPONSOR.com) - U.S. Democratic presidential hopeful Senator Barack Obama (D-Illinois) used an Ohio speech to call for rules governing distributions from retirement savings accounts to be loosened.

Media reports of Obama’s proposal outlined Monday said he would permit Americans to withdraw up to 15%, with a $10,000 maximum, from their 401(k) or IRA accounts without facing the typical 10% early-withdrawal penalties such distributions carry.

Last week, McCain said rules requiring taxpayers to begin drawing down their 401(k) or IRA at age 70 ½ should be suspended so such asset sales do not have to happen in the middle of a down market (See  McCain, Obama Back Loosening RMD Rules ).

“At a time when the ups and downs of the stock market have rarely been so unpredictable and dramatic, we also need to give families and retirees more flexibility and security when it comes to their retirement savings,” Obama said.

News reports said Obama also called for a temporary $3,000 tax credit to companies for each new job created in the United States over the next two years and a 90-day moratorium on foreclosures for homeowners who are living in their homes and making good-faith efforts to make their mortgage payments.

The Illinois senator also wants the Treasury to help unfreeze markets for individual mortgages, student loans, and car loans, loans for multifamily dwellings and credit card loans. All of the measures   should be done immediately, either through existing authority or emergency legislation, Obama asserted.