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Since relief is being granted by extending unemployment insurance and allowing the unemployed to use Medicaid and since the delayed taxes would have to paid anyway, I do think the current economic situation calls for some help to others also by allowing withdrawls without penalty.
I work in the industry and have fixed feelings about it. I dont think they should remove for completely. However, they could add another exception for the current list for those that are about to be foreclosed on or other disasters.
I have had a slew of young people (20s and 30s) calling and pulling money out of their IRAs because they are "scared". I am sorry but if you are doing that, you are an idiot. You have 30, 40, 50 years before you are going to need that money and not only will it rebound, it will likely crash again, rebound again, a few more times before you retire. So, not only are these people taking money out after they have lost but they are going to be taxed on it and pay a 10% penalty on top of those losses.
Right now, you should be contributing as much as possible. Mutual funds are cheap right now and it is like buying stuff at the store that has been heavily discounted.
If you were to remove the penalty, even more people would be pulling it out. For most people, that is a huge mistake.
I don't think there should be a penalty to begin with. The withdrawn funds should be taxed as regular income, but no penalty. If people could do this, maybe more people would save for retirement, knowing in tough times they could access their savings, if necessary.
Of course the banks would not like this, they know we are stuck with the piddly amounts of interest they pay us for traditional IRA's.... saving for retirement my behind. With traditional IRA's your interest doesn't even keep up with inflation, with stocks... well - we all know what happened there. People in their 40's or 50's now most likely will be VERY lucky if they get the money they already lost back, let alone make more money.
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The price of anything is the amount of life you exchange for it. ~Henry David Thoreau
I don't think there should be a penalty to begin with. The withdrawn funds should be taxed as regular income, but no penalty. If people could do this, maybe more people would save for retirement, knowing in tough times they could access their savings, if necessary.
Of course the banks would not like this, they know we are stuck with the piddly amounts of interest they pay us for traditional IRA's.... saving for retirement my behind. With traditional IRA's your interest doesn't even keep up with inflation, with stocks... well - we all know what happened there. People in their 40's or 50's now most likely will be VERY lucky if they get the money they already lost back, let alone make more money.
You do realize that money in IRAs can be invested in a multitude of investments, not just interest bearing savings accounts?
An IRA is a type of investment account, not an actual investment.
If you have an IRA that isnt keeping up with inflation then you arent invested in a very good investment. Try investing the money in some mutual funds. Of course, last year was a bad example but usually you will see returns around 8-10 percent which is well above inflation.
In regards to your comment about you think more people would invest if there was no penalty, no way. People may invest more but they would turn around and pull it right back out. People have very little self-control and we as a nation are consumers that spend beyond our means. The penalty is in place to deter those from withdrawing their retirement so they arent on welfare when they retire.
You do realize that money in IRAs can be invested in a multitude of investments, not just interest bearing savings accounts?
An IRA is a type of investment account, not an actual investment.
If you have an IRA that isnt keeping up with inflation then you arent invested in a very good investment. Try investing the money in some mutual funds. Of course, last year was a bad example but usually you will see returns around 8-10 percent which is well above inflation.
In regards to your comment about you think more people would invest if there was no penalty, no way. People may invest more but they would turn around and pull it right back out. People have very little self-control and we as a nation are consumers that spend beyond our means. The penalty is in place to deter those from withdrawing their retirement so they arent on welfare when they retire.
I have several IRA's, the traditional CD type IRA's were always a joke. My mutual fund lost money, ever since I had it, for about 5 years? 401K is down the toilet too. I don't know about other people, but I will not invest in an IRA this year, I will use that money to buy extra insulation for my house and pay down the mortgage, which is very small and the only debt we have, but still why pay the bank over 5% when the stock market will just go further down the toilet and so will everything else. The only reason we participate in a 401K is the the employer matches the amount so even if we lose half, at least we lost the half the company contributes. I don't believe we have hit the bottom and will not for another year or so. JMHO.
I know it is good to buy at the bottom, but the bottom hasn't been reached yet, by far, IMO.
And here is an interesting tidbit about money market funds
I have several IRA's, the traditional CD type IRA's were always a joke. My mutual fund lost money, ever since I had it, for about 5 years? 401K is down the toilet too. I don't know about other people, but I will not invest in an IRA this year, I will use that money to buy extra insulation for my house and pay down the mortgage, which is very small and the only debt we have, but still why pay the bank over 5% when the stock market will just go further down the toilet and so will everything else. The only reason we participate in a 401K is the the employer matches the amount so even if we lose half, at least we lost the half the company contributes. I don't believe we have hit the bottom and will not for another year or so. JMHO.
I know it is good to buy at the bottom, but the bottom hasn't been reached yet, by far, IMO.
And here is an interesting tidbit about money market funds
Investing in your home is always a good idea and I plan on doing some of that myself this year. I will be putting money into IRAs as well but not much. I like the tax deduction I get from it so always gauge how much to put in based on my tax situation for the year.
Again, this isnt the best time but mutual funds generally perform much better than what you received. We have three mutual funds in 2007 have over a 40% return and most of them had atleast an 8% return.
I believe we are very close to bottom and investing now and continuing to invest to dollar cost average while it is down is a smart move for those that have the time for it to turn around.
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