Tags: Trump Administration | GOP2016 | Marco Rubio | Retirement | Marco Rubio | retirement | withdrawal

Marco Rubio One of Many Under 59 Who Draws on Retirement Funds

By    |   Tuesday, 26 May 2015 07:20 PM

Florida Sen. Marco Rubio wasn’t the only 40-something saver who cashed out his retirement account last year to make ends meet.

According to Forbes, there’s been a "substantial assets leak" from people under age 59½ taking early withdrawals or borrowing against their IRAs or 401(k).

"It is not a trivial sum," Forbes reports, noting the Urban Institute estimates more than 8 percent of working-age retirement account owners made at least one withdrawal between 2004 and 2005, tapping about 20 percent of their total balances.

But even small withdrawals of about 1.5 percent reduce total IRA and 401(k) wealth at retirement by about one-quarter, Forbes reports.

According to the Urban Institute study, those most likely to withdraw early were age 25-34, had low incomes, and had little net worth, Forbes reports, noting young savers withdrawing retirement money can lower their standard of living in retirement.

IRA withdrawals can be made for any reason, but aren’t cheap, Forbes notes — being subject to both tax and, in most cases, those younger than 59½ also owe a 10 percent penalty.

Forbes speculates making the rules tougher could squelch the withdrawal urge, citing a National Tax Survey article that found raising taxes on cash-outs encouraged people to roll over their accounts to IRAs instead of pocketing the money. Relabeling the added tax as a penalty or withholding taxes on cash-outs also increased roll-overs, though neither changed the amount of tax owed, the article found.

The article concluded it may be time for Congress to reconsider tax-advantaged savings, and decide if they should be focused on boosting retirement assets or play a dual role of encouraging savings for retirement and for unexpected hardship, Forbes reports.

And Rubio, a GOP presidential candidate who has a tax reform plan of his own, could be a "spark for the conversation," Forbes writes.

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Florida Sen. Marco Rubio wasn't the only 40-something saver who cashed out his retirement account last year to make ends meet. According to Forbes, there's been a substantial assets leak from people under age 59 1/2 taking early withdrawals or borrowing against their...
Marco Rubio, retirement, withdrawal, assets, funds, tax, penalties
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2015-20-26
Tuesday, 26 May 2015 07:20 PM
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