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A debit card for your retirement account


This morning we were discussing the practice of some employees that take out a loan on their retirement funds in order to get their kids through the last years of college. When I mentioned that in the U.S. you can now get a debit card to withdraw funds from your retirement account, they didn’t believe it. Following is a link to an article about it, in Marketwatch. Thanks to Sound Mind Investing for heads up on this.

The news (actually not new news)

The 401(k) debit card lets you borrow from retirement savings and pay yourself back with interest over time, much as you would with a typical 401(k) loan. Only the card makes it much easier to crack your retirement nest egg; all you do is shop, swipe and sign.

Good news

Yet employers seem to be drawing the line with the debit card. Though the product has been around for several years, few companies offer it — and probably won’t. They’re focused more on automatically enrolling U.S. workers in plans, not handing out quick and easy loans.

The danger

The heightened controversy about 401(k) debit cards comes with the times. There’s a growing concern that with things so tough, people living paycheck to paycheck will increasingly turn to retirement savings as a source of cash. Mortgaging your future — unless it’s for an emergency or to enhance your education or career — is almost always a poor decision. You’ll have less money to support yourself after you retire or you’ll have to work more years before calling it quits.

The article closes with a list of the pros and cons.

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