Hope and change are on the way so spend your way to wealth!

401(k) debit draws red flags

A new debit card that lets consumers use ATMs to withdraw money from their 401(k) plans is drawing a sharp reaction from financial planners.

The ReservePlus card is marketed by Reserve Solutions Inc., a New York financial firm that says it has 10,000 cardholders already. [snip]

“For every $10 you take out of the account, you only have $6 or $7 to spend, probably closer to $6, which means you’re giving up a third of your money,” said Stuart Ritter, certified financial planner for T. Rowe Price, a Baltimore asset-management company. “You’re also giving up money to spend in retirement, so you are by definition lowering your lifestyle in retirement.” [snip]

Employees always have been able to take out loans against their 401(k) accounts, but not with ATM cards. The ReservePlus program allows employees to transfer approved loans into online accounts that continue to earn interest. Employees then can withdraw cash from the account at ATMs, up to the maximum approved by their employers. They also can use their debit cards to buy goods and services. [snip]

“The need for individuals to save for retirement has grown over the year due to the uncertainty of Social Security, the shift away from pension plans and the increasing cost of health care,” said Jennifer Engle, spokeswoman for Fidelity Investments, a Boston money manager. [snip]

What’s with this uncertainty with Social Security? All the politicians, including the candidates for President say it is safe; otherwise, they would have fixed any inadequacies long ago. To complete the circle, we need Universal Health Care.

Regardless of the wisdom of waiting, the 401(k) withdrawal rate has been rising recently. [snip]

Besides, the government will protect you from yourself if something goes bump in the night. So feel safe to borrow for what you need/like/want/desire.

Archived in: Health Care, Politicians, Presidential Politics, Social Security