The Treasury Department decided Thursday not to grant relief in 2008 from rules that require Americans 70 1/2 and older to take minimum annual withdrawals from their IRAs, 401(k)s or other retirement plans. The disappointing decision led some of those affected to recall the famous 1975 New York Daily News headline "FORD TO CITY: DROP DEAD," after President Gerald Ford opposed efforts for a federal bailout of New York City.
For months, there's been talk of some sort of break for seniors whose retirement accounts have been battered by the severe stock-market meltdown. Why force seniors who don't need the money to withdraw money from already depleted nest eggs? During the presidential campaign, both Barack Obama and John McCain backed relief. And, earlier this month, Congress passed legislation waiving required payouts in 2009.
Those facts, plus hints from the Treasury (which oversees the IRS) that some sort of relief would soon be granted, led many senior citizens to postpone taking their required minimum distributions (RMDs). But Treasury decided Thursday that it does not have the authority to waive payouts and that any relief short of that -- such as allowing a smaller sum to be taken -- would be complicated and confusing, and would not be fair to seniors who already had taken their RMDs for the year.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So, if you've been delaying a withdrawal, delay no more.
Contact your IRA or 401(k) sponsor as soon as possible to request the payment. (If you have parents or grandparents who may be affected by this decision, make sure they know about it.)
If you have more than one IRA, your RMD for 2008 is based on the total balance of all of your IRAs as of December 31, 2007, but you can take the money from any one or combination of the accounts. If you have more than one 401(k), a minimum amount must come out of each plan.
Failure to withdraw the minimum amount by December 31 will trigger one of the most vicious penalties in the tax law: The IRS will claim 50% of the amount you should have withdrawn.
There is one exception to the December 31 deadline -- for those who reached age 70 1/2 during 2008. Because this will be their first RMD, they can delay it to as late as April 1, 2009. Doing so normally requires an account holder to withdraw -- and pay tax on -- two years' worth of distributions in a single year, because the second-year payout would be due by December 31, 2009. And that could push you into a higher tax bracket. But that won't be a worry in 2009, since Congress has waived the RMD rule for the year.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Top Tech Gifts to Grab at Walmart Before ChristmasBig savings on Apple, Bose, HP, Vizio and more while there's still time to shop.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
457 Plan Contribution Limits for 2026Retirement plans There are higher 457 plan contribution limits in 2026. That's good news for state and local government employees.
-
Medicare Basics: 12 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2026SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $70,000 in 2025, and up to $72,000 in 2026.
-
Roth IRA Contribution Limits for 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
-
SIMPLE IRA Contribution Limits for 2026simple IRA For 2026, the SIMPLE IRA contribution limit rises to $17,000, with a $4,000 catch-up for those 50 and over, totaling $21,000.
-
457 Contribution Limits for 2024retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2026retirement plans The Roth 401(k) contribution limit for 2026 has increased, and workers who are 50 and older can save even more.
