November 14, 2008

 

Dear Secretary Paulson,
I am writing to urge you to suspend the Required Minimum Distribution (RMD) for 401(k) accounts and IRAs held by seniors who have reached the age of 70 ½.  As a result of the current financial crisis, many senior citizens have lost significant value in their retirement investments.  If required to withdraw from their retirement accounts now, we are forcing seniors to realize these losses unnecessarily and potentially compromising their long term financial well being.  In my own District, I have heard from a number of individuals who are facing this difficult decision in the coming months.
            According to recent Congressional Budget Office estimates, American workers have lost $2 trillion in retirement savings over the past 15 months – this is an historic downturn in the stock market by any measure.  Current tax law requires minimum distributions over the life of the retiree.  However, Treasury Department regulations interpret this as requiring annual distributions and assess a tax penalty equal to 50% of the required withdrawal if a distribution is not made.  By suspending this policy, seniors who are in a position to weather the current market volatility will avoid taking unnecessary losses in their retirement savings.  The RMD also effectively forces out willing investors at a time when we are trying to stabilize our economy and stem the dangerous and disorderly flight from our markets that has occurred over the last few months.  For these reasons, I urge you to provide a temporary waiver on mandatory minimum distributions for retirement accounts.  

                Thank you for your attention to this matter.  I look forward to your response.
Congressman John P. Sarbanes