Key Panel Backs Withdrawal Policy Changes

The congressional Joint Economic Committee, a powerful Capitol Hill force in setting tax and investment policies, has endorsed changes in withdrawal rules for tax-favored retirement savings plans such as the TSP. Under current law, investors must begin making withdrawals from such accounts in the year after they turn age 70 1/2, a requirement that “forces many seniors to take certain minimum distributions when they do not need them. Worse, in cases of a down market, the forced distributions may require seniors to sell assets at depressed prices, even if investment losses have been incurred,” a report from the committee said. The committee noted that there are numerous proposals circulating for dealing with that issue, and that any of them would better provide seniors “with the choice of determining when it is in their best interest to make a withdrawal, how much to withdraw and subsequently pay the appropriate tax.” One such option, which recently passed the House Ways and Means Committee (HR-5558), would raise the minimum distribution age to 75. That plan appears unlikely to move further at least until next year, though.