Downers Grove, IL – U.S. Representative Judy Biggert (R-IL-13th) today announced that she will introduce legislation aimed at helping seniors to ride out the recent economic downturn.  Currently, retirees with 401(k) or IRA plans are forced to regularly withdraw assets from those accounts once they reach the age of 70 and a half.  As a result, many seniors who have recently seen sharp declines in their retirement portfolios are being forced to choose between facing a steep tax penalty or converting assets before the market has had a chance to recover.  Biggert’s bill, the Seniors’ Investment Security Act of 2008 (SISA), would suspend such rules.
 
           “Everyone wants to ‘buy low, sell high’,” said Biggert, Ranking Member of the House Financial Services Financial Institutions and Consumer Credit Subcommittee.  “So this obviously is the worst possible time for the government to be forcing seniors to sell or convert their stocks and mutual funds.”
 
           Under current law, seniors are forced to annually withdraw from their retirement savings a minimum amount determined by the balance of the account and the average life expectancy of the retiree.  If not withdrawn, the amount that would otherwise be disbursed from the retirement account is subject to a 50% tax penalty.  Although the law provides a mechanism through which seniors may opt to move stocks and certain other investments into conventional brokerage accounts, the assets would still be subject to income taxes upon removal from the retirement plan, and the process can be both difficult and costly.
 
           “Seniors in my district tell me they want to give their investments a chance to recover,” said Biggert.  “The government is taking huge steps to get the financial markets back on track.  Why wouldn’t we let our retirees benefit from those actions too?”
 
           Biggert’s proposal would place a three-year moratorium on the forced withdrawals, known as Required Minimum Distributions (RMD).  According to the Census Bureau, there are approximately 5.5 million households with at least one IRA- or 401(k)-holder over 70 who could benefit from the legislation.  Holders of Roth IRAs would not be affected because, unlike standard IRAs and 401(k)s, Roth IRAs consist of post-tax earnings and are not subject to RMDs.
 
           “The market is making trillion-dollar swings that severely impact retirement accounts,” said Biggert.  “Seniors should be allowed to sell their investments when it makes economic sense, not forced to take huge losses because of ill-conceived tax policies.”
 
           Biggert says she will officially introduce the legislation this November when Congress reconvenes for the expected lame-duck session.  She plans to push for its inclusion in any second stimulus legislation or as a stand-alone measure.

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