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Fiscal Cliff Idea: How About We Tax Your 401k?

restoreliberty Wrote: Nov 30, 2012 11:52 AM
pay a penalty, but you can easily access these deferred contributions. If you are withdrawing money early for certain reasons - purchase of a home, funeral expenses, college expenses, medical expenses, etc. then there is no penalty and you will simply indicate the expense type on your tax return and pay ordinary income tax on the amount your withdrew. To access money in the employer plan one must either apply for a loan, or request a hardship distribution, but you cannot directly withdraw money just for the hel l of it. In an IRA you can -- you just have to pay the piper by paying income tax and a 10% penalty. But maybe that new flat screen t.v. with a 20% discount, or new car with a hefty rebate is worth a 10% tax penalty.

How do you feel about the government touching your private retirement account known as your 401k in order to "pay down the deficit?" Not so good? Already feel like the government has stolen your retirement through Social Security? Well get ready because taxing the 401k is floating around as an idea while the fiscal cliff talks on Capitol Hill continue.

One of the earliest fears about tax-favored savings accounts like IRAs and 401(k) plans was that when this pool of savings grew large enough Congress would not be able to resist tapping it to help solve the...