During a McCain-Palin campaign press conference call , former Congressman Rob Portman (R-Ohio) said that a recent proposal by Democratic presidential hopeful Senator Barack Obama (D-Illinois) “â€¦. seems like it would be just the wrong thing to encourage American families today who are already struggling to figure out how they are going to be able to prepare for their retirement.”
“One of the things that I thought was interesting about Senator Obama’s proposals today was the talk about changing the way in which people can withdraw funds from their defined contribution plans, their IRA’s or their 401K’s”, Portman said. “And as I read his remarks it sounds like he was saying that people would be able to withdraw funds out up to $10,000 without penalty.”
Obama has, in fact, called for new legislation to allow families to withdraw 15% of their retirement savings – up to a maximum of $10,000 – without facing a tax-penalty this year (including retroactively) and next year (see Obama Wants Looser 401(k) Distribution Rules ).
Portman, once touted as a potential vice presidential nominee for GOP presidential hopeful Senator John McCain (R-Arizona), during his dozen years in Congress played an active role in developing pension legislation, notably the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), commonly referred to as “Portman-Cardin” after Portman and then-Congressman Ben Cardin (D-Maryland), who co-sponsored the bill (see EGTRRA Co-sponsor Looks Ahead ).
Portman’s criticism was echoed by McCain himself; “Obama yesterday offered up a proposal that would have the effect of encouraging early withdrawal of funds from 401k accounts, by suspending penalties through 2009. This is an invitation to capital flight, and therefore to continued instability in the market, at a moment when exactly the opposite is needed.”
Last Friday McCain called for the suspension of the minimum distribution requirements that “mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half.” That same day the Obama campaign issued a statement echoed that sentiment – with a slight twist. “Barack Obama supports allowing senior citizens to delay withdrawals from 401(k)s and believes we don’t have to wait for Congress to act to provide seniors with these protections,” spokesman Bill Burton said, according to published reports (see McCain, Obama Back Loosening RMD Rules ).
More From McCain
McCain has just expanded on his initial proposal to suspend the minimum distribution requirements. His ” Pension and Family Security Plan ” would, among other things, apply new tax rules that would impose a maximum tax rate of 10% for up to $50,000 withdrawn from “tax preferred” accounts, such as an IRA or 401(k), this year and next, by individuals over the age of 60, rather than the ordinary income tax rates that would normally apply.