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From: tbg@apollo.uucp (Tom Gross)
Newsgroups: net.taxes,net.invest
Subject: New penalty on 401k plan withdrawals
Message-ID: <2fc05008.2a75@apollo.uucp>
Date: Wed, 27-Aug-86 12:42:46 EDT
Article-I.D.: apollo.2fc05008.2a75
Posted: Wed Aug 27 12:42:46 1986
Date-Received: Fri, 29-Aug-86 18:50:11 EDT
Organization: Apollo Computer, Chelmsford, Mass.
Lines: 37
Xref: mnetor net.taxes:558 net.invest:1149



>If anyone can explain any reason for there being a penalty for 
>withdrawing money from a savings plan, let me know.  
>Sounds like the investment banking 
>lobbyists got their way on this one.  They probably wanted to 
>make it completely illegal to withdraw funds from savings plans
>but didn't have enough money ^h^h^h^h^h^h influence to convince
>congress, so settled for this compromise :-).


    If they had lowered the marginal tax rates, as they did,
    WITHOUT adding a penalty for early withdrawal from 401K
    plans, everyone who had been shielding their income in 
    401k plans for the past couple of years could withdraw their
    money next year with considerably less exposure to taxes.  It may
    not be that 28%+15% will equal out to what your original tax would
    had been on your 401k contribution, if 401ks had never existed,
    but how much complexity do you want?

    Instead of calling a 401k plan a "savings plan", why don't you
    call it a tax shelter for rich people?  You talk as though the Feds
    have decided to tax withdrawals from piggy banks.  

    I might have cashed in mine (it was one of the first things I 
    thought of when they were talking about lowering the top rate to 
    27%), but it doesn't bother me that they out-flanked me on this 
    one.  Should it bother me?  I'm getting a TREMENDOUS tax shelter 
    this year and building a nice nest egg for the future; I don't feel 
    I need any more preferential treatment.  I guess if you think rich 
    people deserve more tax breaks, then adding the penalty on 401k 
    withdrawals would be a pisser.  
 

    Tom Gross
    Apollo Computer, Inc.
    Chelmsford, MA