AARP: Treasury Inaction to Temporarily Freeze Mandatory Retirement Account Withdrawals is Disappointing

Source: AARP Press Center |

December 2, 2008

Contact: Danielle Holland (202) 434-2597 dholland@aarp.org

WASHINGTON — Earlier this fall, AARP called on the Treasury Department to issue an immediate, temporary freeze on mandatory retirement account withdrawals. Doing so would have offered some much needed financial flexibility for millions of older Americans who have lost significant retirement savings during the recent financial crisis. With the end of the year and the deadline for taking a minimum required distribution approaching, AARP is disappointed that Treasury has taken no action. Consequently, AARP is urging Congress to include some level of relief in the anticipated second stimulus plan. In light of Treasury’s inaction, AARP Legislative Policy Director David Certner issued the following statement:

“As the stock market continues to falter, and reports find that our economy is in a recession, more and more Americans are looking to our government and elected leaders to help alleviate the financial burdens that have only increased during these challenging times. With this in mind, the Treasury Department’s inaction to make minimum withdrawals optional rather than mandatory for this year is disappointing.

“Retirement savings losses over the past year have been staggering. Reasonable estimates suggest that inflation-adjusted losses in defined contribution and individual retirement accounts between September 30, 2007 and October 16, 2008 may have reached $2.3 trillion, or 27 percent. Because of Treasury’s inaction, and given the overall decline in the stock market, older Americans may now be forced to make a choice between taking a withdrawal that was calculated based on much higher values in retirement accounts or face a high tax penalty, leaving them with less savings to work with during these uncertain economic times.”

“As Congress and President-elect Obama work to craft a second stimulus package, the possibility remains that some level of relief could be offered for older Americans who are required to take distributions. We are encouraged by proposals to temporarily freeze withdrawals for 2009 and we are working to explore options that may still provide some assistance to those who were required to take their distribution this year.

“With an uncertain financial road ahead, AARP will continue to work with our elected leaders to identify meaningful ways to offer financial relief not only for older Americans, but for all of those who continue to struggle to make ends meet.”

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world's largest-circulation magazine with over 34.5 million readers; AARP Bulletin, the go-to news source for AARP's 40 million members and Americans 50+; AARP Segunda Juventud, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.