What Obama and McCain's New Plans Mean for You

With job losses growing, housing prices falling and the stock market on the ropes, the presidential candidates are working as fast as they can to gin up new policies to appeal to anxious voters. And if all these ideas happen to tack a few more billion onto our already gigantic budget deficit, so be it. Here is the breakdown of what John McCain and Barack Obama are proposing.

HOUSING

Obama: As part of a broader initiative to address the faltering economy, Obama on Monday proposed a 90-day moratorium on foreclosures for banks that receive capital from the government's new bailout initiative. It would apply to borrowers that make "good faith efforts" to pay their mortgages, The Washington Post reported.

The moratorium could enable the government to buy time until its acquisitions of mortgage securities and bank equity puts it in a better position to rework the troubled loans. Stephen Stanley, the chief economist at RBS Greenwich Capital, says such a plan could be beneficial to certain troubled borrowers. "If you've lost your job and you are going to get a new job in a few months and you've got an income stream prospectively going forward than that's the sort of situation where [the 90-day moratorium] could really help," Stanley says. "[But] if you just can't afford the house no matter what—and there are people that are in that situation—then I'm not sure what the government can do."

McCain: Last week, McCain announced a $300 billion plan calling for the government to purchase mortgages from troubled borrowers and exchange them for less-expensive, fixed-rate loans backed by the Federal Housing Administration. The program would be limited to primary residences. Homeowners must also be able to prove that they were creditworthy borrowers when they first obtained the loan. Funds from the $700 billion bailout will go towards this program. Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School, said that while the initiative may indeed help distressed borrowers avoid foreclosure, its costs could end up exceeding initial estimates. "Three hundred billion does not sound like it's nearly enough," she said, partly because plan would be open to a wide swath of troubled borrowers. "The way it reads here, tomorrow we should all be lining up [to participate]," she said.

RETIREMENT

Taking a distribution from your retirement account this year when retirement balances are at historic lows isn't good for anyone's retirement future. Under current law, everyone age 70 1/2 or older with a traditional IRA must take what is known as an annual required minimum distribution, or RMD, which is taxed as income. Both Barack Obama and John McCain have recently circulated proposals to temporarily suspend the required withdrawals for seniors over age 70 ½. Here's how the candidate's proposals stack up.

Obama: In addition to waving the RMD for those age 70 ½ or older, Obama will exempt any withdrawals made up to the required minimum amount from taxation. Those younger than age 59 ½ who need access to their retirement stash usually have to pay a 10 percent early withdrawal penalty under current law. Obama proposes penalty-free hardship withdrawals of 15 percent up to $10,000 from IRAs and 401(k)s in 2008 (including retroactively) and 2009, although still subject to normal taxes.

McCain: After exempting seniors age 70 1/2 or older from the RMD, McCain will tax withdrawals from tax preferred accounts at the 10 percent rate up to the first $50,000 withdrawn. Both Obama and McCain's plans will offer some relief to flailing nest eggs by allowing savers to avoid selling low. But for retirees who actually need to spend their nest eggs for living expenses this year, Obama's proposal offers tax free required minimum distributions, while you'll have to pony up 10 percent of your withdrawal to Uncle Sam under McCain's plan. Additionally, Obama's plan gives younger savers penalty free access to their cash for immediate expenses, although they must still pay taxes on it.