Wednesday, October 15, 2008
Tapping Retirement Accounts
Both candidates are to some extent, coming out in support of allowing people to tap into their 401K's (without penalty) to meet their mortgage payments or other obligations. This is a good sign. We've suggested here before that 401k's and other retirement vehicles are excellent sources of capital, and that tapping into them should not be considered some kind of crisis action. Yes, people will have less working for them when the market returns....but hopefully, they will also have a house and their credit rating.
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4 comments:
I was encouraged on this, but think Obama's proposal doesn't go far enough. If I'm hearing the talking heads correctly, average household credit card debt alone is upwards of $15,000, and it's likely these same folks are up to their eyeballs in mortgage debt too - then ten grand wouldn't scratch the surface.
If a taxpayer manages to save $100K in 401k and finds himself $90K in debt, let 'em tap the whole nut.
The difficulty will be policing this; you know, human nature and all. I refer to the $2,000 debit cards that were handed out following Hurricane Katrina as evidence of this.
Implement a two year moratorium on federal and state tax penalties for the entire amount, so long as the proceeds are used to retire qualified debt (mortgage, credit card, health care).
But this won't happen. Obama doesn't like tax cuts, and his trickle up crowd don't have 401k's anyway.
I'd be interested in knowing how we'd "police" the use of the funds. Not saying it would be impossible, just hard.
The easy answer is that we shouldn't have to.
When those folks who tap into their IRAs and 401k start whining in 20-30 years that they can't afford to retire, would someone please remind them that there are dog foods on the market that make their own gravy!
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