Can’t we dip into our retirement money at a reduced tax rate?

Dear John: I have been following you for over 25 years.

Is there any chance the proposal that you wrote in 2004 about dipping into retirement money at a reduced tax rate could now be passed?

It would stimulate the economy and generate tax revenue. In my humble opinion, we could be heading into a nasty recession and this suggestion could help big time. L.S.

Dear L.S.: I believe it would help during a recession. And it not only wouldn’t hurt the budget deficit, it would help it, since people who withdraw money from their retirement accounts would actually pay taxes at — as you said — a reduced rate.

However, I don’t think the timing of this would be good right now. With the stock market going down, my proposal would cause people to liquidate stock positions held in their retirement plans at a time when there is already too much selling.

Once the market settles down, I’m all in favor of this again.

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