The New York Times had a good side-by-side comparison yesterday of Obama and McCain's economic recovery plans and tax proposals. It's pretty much reproduced here.
One thing that struck me was that both candidates are proposing to make some changes to the penalties to early withdrawals from 401ks in 2008 and 2009:
Temporarily suspend mandatory annual withdrawals from Individual Retirement Accounts and 401(k)s. Current rules require investors to start selling stocks at age 70½. Exempt withdrawals made up to the required minimum amount from taxation. Allow savers to withdraw 15 percent, up to a maximum of $10,000, without paying a penalty as the law currently requires for withdrawals before age 59½. These withdrawals are subject to normal taxes.
Temporarily suspend mandatory annual withdrawals. Current rules require investors to start selling stocks at age 70½. Allow savers who are younger than 59½ to withdraw up to $50,000 at the lowest tax rate of 10 percent in 2008 and 2009.
I guess the thinking is that people are hurting and might really need this money right away, and that if they spend it, it will stimulate the economy. But I couldn't help thinking, do we really want to encourage people to spend their retirement savings early? Americans save so little as it is-- 401ks are one of the few things that successfully force automatic savings (once you opt in), and then give a big disincentive to taking the money back out again before you retire, via taxation and penalties. This doesn't strike me as a particularly valuable part of either candidate's overall plans. What do you think?