The Act should help give older Americans some much needed financial flexibility as they struggle to manage their finances during this difficult economic time.
A key provision in the Act is designed to help alleviate the financial burden facing seniors who have seen their retirement savings shrink dramatically.
The new provision provides relief to senior citizens by allowing them to continue to keep money in retirement accounts that they are typically required by law to withdraw once they reach age 70 1/2.
Generally, individuals with retirement accounts must make required withdrawals based on the size of their account and their age every year after age 70 1/2.
This rule is intended to prevent wealthy individuals from using retirement accounts as a tax shelter. Any individual who fails to take a required minimum distribution (RMD) is heavily penalized with taxes equal to 50% of the amount not withdrawn.
The Act suspends the required minimum distribution from retirement accounts in 2009. This waiver, which is available to everyone regardless of their total retirement account balances, applies to all defined-contribution plans, including 401(k), 403(b), 457(b), and IRA accounts.
Suspending the mandatory withdrawal allows retirees to keep the money in their account if they choose, and possibly recover some of their losses.
Get Clipmarks - The easiest way to email text, images and videos you find on the web.