In an effort to protect West Virginia seniors’ retirement savings, U.S. Rep. Nick J. Rahall (D-WV) called on U.S. Treasury Secretary Henry Paulson to end a tax penalty on seniors’ retirement savings accounts.

“Unless this provision is suspended, American seniors will be penalized coming and going during this current period of fiscal uncertainty,” said Rahall.  “They will be penalized by the all too real drop in their retirement account holdings as the market continues its decline and then they will be penalized again by being forced to sell a portion of those holdings at a loss.”
 
Current regulations require account holders of 401(k)-type accounts to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out the minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty.  For instance, if an individual fails to withdraw a required $4,000, they would be assessed a $2,000 tax the next year.
 
Unfortunately, as a result of the financial crisis, many seniors have seen their savings evaporate.  The Congressional Budget Office reported last month that $2 trillion has disappeared from Americans’ retirement plans over the past 15 months.

“In just a few short weeks, our seniors have watched their retirement savings vanish before their eyes,” said Rahall.  “If we act now, we can prevent further loss.”