Relief for retired seniors may come too late if the Treasury Department doesn’t change the rules on mandatory withdrawals from 401(k) plans this year.

The required minimum distribution rule requires 401(k) investors age 70-1/2 or older to take mandatory withdrawals, starting at 4% of the previous year’s balance and increasing annually.

The gut-wrenching markets of 2008 have decimated many retirees’ life savings by as much 45%, seriously increasing the possibility that they will outlive their savings. Older retirees who don’t take the required minimum withdrawals face steep penalties.

“It’s kind of like they’re being punished for everything else that went wrong,” Michael Kresh, president of M.D. Kresh Financial Services, told Newsday. “Retirees that could have used a little help didn’t even have the opportunity to take less money.”

In a letter to Congress, officials at the Treasury and the Internal Revenue Service said they thought further change to regulations in 2008 could be “complicated and confusing for individuals and plan sponsors.” While seniors may not get help this year, President Bush is expected to sign legislation from Congress that will defer required distributions in 2009.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.