Does It Make Sense to Withdraw from Our 401 K Plan?
Politicians are looking for solutions to some of the personal financial crisis we are facing. Most political solutions make one situation worst while trying to fix another crisis. So the answers to student loan debt and long-term care problems in America involve one solution from Congress – the ability to withdraw from our 401 K plans to help alleviate the problem.
Here is Senator Rand Paul’s plan to help reduce student loan debt:
“Rand Paul’s HELPER Act (LINK) would allow Americans to take up to $5,250 annually from a 401k or IRA—tax and penalty-free—to pay for college or pay back student loans. These funds could also be used to pay tuition and expenses for a spouse or dependent.
The plan would enable two parents and a child, for example, to put over $15,000 in pre-tax funds in one year toward tuition or loan repayment if each set aside the maximum. Currently, Americans can only pay for their student loans with after-tax money, placing an unnecessary constraint on their budget.”
Then there is this solution to long-term care.
“A bill currently being discussed in Congress would allow retirement savers to tap assets held in 401(k) plans and individual retirement accounts tax-free to buy long-term care insurance, with the aim of making the insurance more affordable and potentially driving down premiums for customers."
Sure being able to tap 401 K plans for student loan debt and insurance needs does help address the problem. It also adds to another big problem we are facing as a country – the upcoming retirement crisis.
So they want you to reduce the savings that you need to live off of for retirement? That is as creative as they can become? Grant it that solution is better than free student loan and college tuition money. However, these are solutions heading in the wrong direction.