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Author: Fool4Golf One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Need relief from 10% penalty Date: 9/23/2001 11:44 PM
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Here is what I will send via e-mail to the senators and representatives of my state.
==============================================
[Salutation]

The economy is in recession, the market is at a three year low, war has been declared, people are getting laid off in droves, and many believe that it's going to get worse!

Many of us have most of our investments in various so-called retirement accounts, 401's, 457's IRA's, etc. Did you know that for the vast majority of us, there is a 10% penalty assessed if we touch these funds before age 59 1/2? This 10% penalty is assessed on top of the regular income taxes on any money withdrawn. Somehow this 10% penalty doesn't seem fair, even in normal times. We are not in normal times. Certainly you can see how many of us will need access to these savings just to exist.

We also believe the fact that we saved the funds stands as proof that we are perfectly capable to decide when we need them. The 10% penalty serves only to punish those who have a dire need to access their own funds.

We're not asking for a bailout. We'll continue to pay regular income taxes on withdrawals. We just don't believe the 10% penalty was meant for times like these.

Is there any way we can get some relief from the 10% penalty?

Respectfully;
============================================================
Won't you please assist in getting this message to congress?

Here are the links and the proper salutation:
http://www.senate.gov/ Dear Senator [last name]
http://www.house.gov/ Dear Mr. [last name]
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Author: conick Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54178 of 121061
Subject: Re: Need relief from 10% penalty Date: 9/24/2001 12:02 AM
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If you could withdraw the money any time you wanted with no penalty, would it still be considered a retirement account?

The whole purpose of having the tax benefits of 401K, IRAs, etc is to entice people to save for retirement themselves instead of depending on SS. I doubt you would get these tax breaks if it was just a means to invest.




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Author: Fool4Golf One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54179 of 121061
Subject: Re: Need relief from 10% penalty Date: 9/24/2001 12:27 AM
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What's so special about a "retirement" account? It's just funds with a name. Reasonable people would tend to want to use those funds as a last resort, meaning there is some dire need when they have exausted all other sources.

It wouldn't surprise me if these people would be denied any Social Services because they actually have scrimped and saved for the future. OTOH, the people that squandered their funds on the pleasures of the hour would be so poor that they would be awarded the Social Services. What's fair about that?





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Author: conick Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54180 of 121061
Subject: Re: Need relief from 10% penalty Date: 9/24/2001 1:48 AM
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What's so special about a "retirement" account? It's just funds with a name.

And a hefty tax break.

Reasonable people would tend to want to use those funds as a last resort, meaning there is some dire need when they have exausted all other sources.

Reasonable people would ONLY have retirement accounts if there was no penalty for withdrawl (until they were maxed out of course).

You probably know this already but the current system has hardship exceptions built in. Check out:
http://www.fool.com/money/allaboutiras/allaboutiras07.htm

It wouldn't surprise me if these people would be denied any Social Services because they actually have scrimped and saved for the future. OTOH, the people that squandered their funds on the pleasures of the hour would be so poor that they would be awarded the Social Services. What's fair about that?

Its not fair (if we had a dime for everytime something wasnt fair in our lives we wouldn't be having this conversation, we'd both be retired). The people that save can have the retirement they want, the people that squander are dependent on the government. Personally, I'd rather be in the former group and I would have a hard time watching someone starve because of some very poor decisions because Social Services wasnt offered. (But thats for another thread).

Hey, if you can get less restrictions without giving up tax benefits, I'm all for it. (But they'd definitely have to change the name :) )

Good Luck in your pursuit.

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Author: euphoriant Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54183 of 121061
Subject: Re: Need relief from 10% penalty Date: 9/24/2001 8:19 AM
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I'm not expert by a long shot, but the other problem I see is bankruptcy. In times like these bankruptcy will most likely be on the rise.

Retirement funds are protected in bankruptcy, one of the reasons is due to the 10% penalty. Take that away and you may have lost some, if not all, of your retirement if you were to declare bankruptcy.

Just a thought to consider,
e

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54184 of 121061
Subject: Re: Need relief from 10% penalty Date: 9/24/2001 1:23 PM
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Retirement funds are protected in bankruptcy, one of the reasons is due to the 10% penalty. Take that away and you may have lost some, if not all, of your retirement if you were to declare bankruptcy.

I don't believe this is entirely true. Qualified retirement plans (such as pension, 401(k), etc.) are protected in bankruptcy, but I think that IRA's are "reachable." One of the only arguments in favor of leaving 401(k) assets within the 401(k) and not rolling over to an IRA is that they are more secure from creditors in the 401(k).

Ira


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