Obama Backs Penalty-Free Hardship Withdrawals

Sen. Barack Obama says workers should have easier access to retirement plan savings this year and next.

Obama, D-Ill., the Democratic presidential nominee, today released a “rescue plan for the middle class.”

One provision would allow for penalty-free hardship withdrawals from individual retirement accounts and 401(k) plans in 2008 and 2009.

The provision would permit taxpayers to withdrawal 15% of their account funds, up to a maximum of $10,000.

Taxpayers who used the provision would have to pay income taxes on the amounts they withdrew, but not extra penalties, according to a summary of the plan released by the Obama campaign.

Obama also wants to let taxpayers over age 70.5 wait before withdrawing retirement plan assets, to eliminate pressure to sell account assets while the stock market is down and “lock in their losses.”