Mandatory 401K Withdrawals Suspended?

Congress has just voted to suspend mandatory 401K withdrawals for people over the age of 70. President Bush is expected to sign the legislation. The suspension is only for the 2009 tax year.

The idea behind suspending the minimum distribution rule is that the value of most 401k plans have plummited along with the market so to force people to withdrawal a mandatory percentage when the value of their investments are way down is just cruel.

Under the old rule, there was a 50% penalty on the amount that should have been distributed, a very compelling reason to make the minimum distribution. The only exception is if the account owner is still employed at the company sponsoring the 401(k) plan.

Haven’t retired yet and are still saving money in your 401K? Here is a Wall Street Journel video on saving money in your 401K.