A bit of good news for Americans age 70 1/2 and older: Last week the U.S. House of Representatives unanimously passed the Worker, Retiree, and Employer Recovery Act of 2008—effectively granting these seniors reprieve from making required minimum distributions (RMDs) from their retirement accounts in 2009.

BusinessWeek first wrote about this back in November, after AARP CEO Bill Novelli wrote to Treasury Secretary Henry Paulson calling for a “temporary freeze” on mandatory withdrawals.

The RMD is a percentage of assets based on the account's value on the last day of the previous year. At the end of 2007, IRA assets totaled about $4.7 trillion dollars. But three months later, total assets were down 4%—and given the Standard & Poor's 500-stock index's 33% drop since Mar. 31, those assets are even lower now.

AARP Legislative Policy Director David Certner issued the following statement:

“On behalf of the older Americans who are struggling during these turbulent economic times, AARP is pleased that the House took decisive action to help alleviate the financial burden facing tens of thousands of seniors who have seen their retirement savings shrink dramatically. By making minimum withdrawals from retirement savings accounts optional rather than mandatory for next year, older Americans are poised to hold on to more of their diminished nest-eggs."

However, this age group—which owns about 24% of IRA assets—is still on the hook for 2008.

Financial planners suggest tapping liquid holdings first to avoid selling securities at a loss. Seniors who don't need cash for living costs can make a withdrawal "in kind" to move stocks or bonds to a non-IRA brokerage account. They'd owe tax on the distribution, but wouldn't lock in a loss. And the charitably inclined can roll over as much as $100,000 to a cause.

Go to www.irahelp.com for more info.

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