McCain’s retirement-account liquidation idea

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John McCain is suggesting on the campaign trail today that the IRS rules that require owners of retirement accounts (IRA, 401ks, etc.) to withdraw a certain amount (there’s a formula) from those accounts every year after they turn 70 1/2 ought to be suspended because of the market crash.

Sayeth the Senator from Arizona:

To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended.

It doesn’t seem like a bad idea at first glance. If there are any tax lawyers or others out there who think it is, please let me know. But it also seems pretty trivial. First of all, the only people the suspension would help are those who don’t need the money right now. And for the bulk of retirees (that is, people in their 70s) the required annual withdrawal amount is 5% or less of the total in the account. Still, this could be a big deal for 100-year-olds, who must withdraw as much as 16% a year. They should definitely vote for McCain.

Update: From jstnorv in the comments:

I can’t believe that no one on McCain’s staff knows that you do NOT have to take IRA distributions in cash. You can transfer stocks or mutual funds in kind to a taxable account and depending on the situation could actually benefit from doing so. Do they not know this? I can understand individuals not knowing this but I find it inconceivable that no one on his staff does.

If that’s the case, then the verdict on this proposal is clear: Completely bogus.