It’s pretty hard these days to turn on a TV or pick up a paper without hearing or reading about bailouts. When Congress passed a bill in October providing around $800 billion dollars to help the US financial industry, I voted against it, as well as an earlier version a few days prior.
Now, we find ourselves in the midst of yet another potential bailout, because even as I write this column, the Senate, followed by the House of Representatives, is holding hearings on Capitol Hill to determine how more taxpayer money could be spent to bailout the auto industry.
It’s bad enough that Congress is trying to find more ways to spend money it doesn’t have, but it’s a heck of a lot worse when that money is spent ineffectively. Rather than dipping into federal coffers and putting our country deeper into debt, we could help residents of this country in a real and practical manner.
For example, as we all know, Americans have seen significant decreases in the value of their investments, particularly their Individual Retirement Accounts (IRAs) and 401(k)s.
Older Americans are particularly affected by the financial downturn. Under current federal law, individuals aged 70 ½ and over are required to start taking minimum withdrawals from their individual retirement account or 401(k) plan. The amount of the withdrawal is based on Internal Revenue Service (IRS) life expectancy tables and the value of the account the end of the previous year.
This year, that’s a real problem. The S&P 500 index has declined 42 percent since the end of 2007. This means that many seniors will be forced to draw down their accounts at a time of decreased value, resulting in significant financial losses.
For that reason, I am proud to cosponsor legislation which would suspend the mandatory minimum withdrawal requirement for 2008 and 2009. The Temporary IRA Distribution Suspension Act will give retirees the option of leaving some or all of their current contribution in the market. The contributions would not be subject to existing tax penalties, and would be allowed to regain value as the current and next Congress continues to work to get our economy back on track.
While younger retirees at least have the option of postponing withdrawals until the market recovers, those who are older than 70-1/2 aren’t as fortunate. These individuals have worked hard, saved, and invested their money for years. The government should not force them to sell in a bad market.
I am hopeful that Congress will pass the Temporary IRA Distribution Suspension Act, and help preserve older Americans’ retirement accounts.
U.S. Rep. F. James Sensenbrenner Jr. (R-Menomonee Falls) represents Wisconsin’s Fifth District.
