Saturday, February 02, 2008

401k Debit Card?

OMG, what is this country coming to? It appears we're taking saving down to a new low. Instead of saving for retirement, we're about to start using it as a regular savings account. This article talks about how companies are starting to implement 401k Debit Cards.

Companies are attaching actual debit cards to people's 401ks. They walk up to an ATM and are able to take out the cash saved in the account. Unlike traditional 401k loans, the borrower pays back the "Loan" like a credit card and not through traditionally payroll deductions. This makes it easier to borrow money without a thought.

Also the 401k loans might become like revolving lines of credit. People are able to take money out immediately and pay it back immediately.

One immediate risk is that people will take everything out and never return it. They will drain any retirement savings before they even retire. A second problem is how will they money have time to grow in investments if people continually are tapping into it? Will they pay transaction fees for moving into and out of the plans mutual funds?

Since traditionally 401k loans take a long time and lots of paperwork, this method will save companies time and money. However it will make accessing an individual's 401k way to simple and easy.

I think it's a stupid idea. Problems will arise immediately and it will quickly become apparent that people when given the opportunity will spend all their money rather than wait for deferred gratification. So I guess this program will be in place for maybe 1 year.

1 comment:

Beany said...

This is the silliest thing I have heard of today (everyday is a new day). I guess now that consumers have tapped out their credit cards, the way to get the economy going is through sabotaging our futures?