David Kirkpatrick

July 29, 2008

401(K) debit card — a bad, bad idea

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 1:20 pm

This article is the first I’ve ever heard of the concept of a 401(K) debit card, but man the idea is stupid. The penalties are so high for tapping into 401(K) money early, that “nuclear option” should be reserved for financial relief of the last resort.

I can’t believe Congress is even debating this idea. Guess the bank lobby is flexing some muscle. Banking has such a great track record over the last fifteen years or so for looking out for the best interests of its customers …

From the link:

It’s bad enough that 40% of workers in their 20s and 30s cash out their 401(k)s when they switch jobs, even though taxes and penalties decimate the balances to almost half, according to a CMI survey of 1,200 people in January commissioned by Fidelity.

Worse, even, a small percentage of 401(k) participants take out loans or hardship withdrawals from their retirement savings, which average only $122,000 in the first place, with a national median balance of $66,000, data from the Investment Company Institute and the Employee Benefit Research Institute shows.

Now Congress is debating the pros and cons of supplying people with 401(k) debit cards.

Are they serious? Putting this piece of plastic in investors’ hands would be akin to telling them to live for today and go out and spend whatever money they’ve saved for retirement.

1 Comment »

  1. Consider the presumptuousness in the banking lobby involving itself and insisting that its interests be served in Congress as it fashions financial regulatory reform. That they are in any position to be part of that process is beyond at least John Galbraith. If you are interested, here is my post: http://euandus3.wordpress.com/2009/10/31/the-banking-lobby-on-the-presumptuousness-of-pushiness/

    Comment by euandus — October 31, 2009 @ 1:46 pm


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