MrsTaborJet Posted March 2, 2008 Share Posted March 2, 2008 This sounds like the worst idea EVER. For people already in major debt, how is this going to solve their problems? Burning through your retirment money is not the solution. This is the worst idea EVER. New Debit Card Borrows Against 401k Last Edited: Thursday, 31 Jan 2008, 7:17 PM EST Created: Thursday, 31 Jan 2008, 6:48 PM EST In a move that financial analysts are calling a dangerous gamble, one company is offering a debit card that lets you tap into your 401k savings. With the threat of a recession looming, many families are looking for ways to get some quick cash to make it through these hard times. In a move that financial analysts are calling a dangerous gamble, one company is offering a debit card that lets you tap into your 401k savings. Borrowing against your 401k isn't a new concept, but financial planners say making that money so easily accessible through a debit card greatly increases the potential danger. Money taken out of a 401k now could mean less money left for retirement. The Reserve Solutions ReservePlus debit card lets employees borrow against their 401k plan by making withdrawals at ATMs, paying interest on the money withdrawn. The director of Reserve Solutions says there are a number of advantages to the program including: Young contributors are more likely to open accounts, knowing they can access the money in an emergency Since people can withdraw as they need, Reserve Solutions says its clients take out 35% less than traditional 401ks The ReservePlus debit card was first offered in 2003, but Reserve Solutions is just beginning to market it now. Reserve Solutions claims the program has between 5,000-10,000 subscribers. Link to comment Share on other sites More sharing options...
faba Posted March 2, 2008 Share Posted March 2, 2008 The worst thing people can do is to tap into their retirement savings-unfortunately more and more people are doing it or taking loans from it. Link to comment Share on other sites More sharing options...
MrsTaborJet Posted March 2, 2008 Author Share Posted March 2, 2008 The worst thing people can do is to tap into their retirement savings-unfortunately more and more people are doing it or taking loans from it. I would never touch my 401k, unless for a new home or if there was some catastrophe and had no other options. I can only see this as being good if people pay off their entire debt in one shot and have the ability to not get themselves back into debt again. But to take $10k to put down on $50k worth of credit card debt is absurd. It's the tip of the iceberg and not going to help in the long run. Everyone's circumstances are different and don't mean to judge, but there are too many people out there who may look at this like a quick fix... people not too savvy with their money and not realize this could make it ten times worse. With downsizing too, hope they consider they need to pay back the loan in lump sum if they are terminated. Eeek. My gut just tells me this is a BAD idea. :fighting0093: Link to comment Share on other sites More sharing options...
Garb Posted March 2, 2008 Share Posted March 2, 2008 Talk of 401k's and IRA's makes me ill right now. I made the mistake of opening my Fidelity IRA statement recently. I knew bettter. Shouldn't have done it. Stupid Garb! It was depressing. Link to comment Share on other sites More sharing options...
Jet Moses Posted March 2, 2008 Share Posted March 2, 2008 20% witholding tax and and a 10% penalty. Factor in the loss of future interest not negated by tax and inflation, it is quite simply the most idiotic financial decision a person can make. Link to comment Share on other sites More sharing options...
JETSFAN5180 Posted March 2, 2008 Share Posted March 2, 2008 People need to live within their means.Purchasing things you cannot afford is the reason for all this debt. Credit card debt is out of control in this nation. I dont know how some people sleep at night knowing they owe so much money. Link to comment Share on other sites More sharing options...
Garb Posted March 2, 2008 Share Posted March 2, 2008 20% witholding tax and and a 10% penalty. Factor in the loss of future interest not negated by tax and inflation, it is quite simply the most idiotic financial decision a person can make. It's not a withdrawal, it's borrowing, right? So, essentially (and taking into consideration you are a long-time employee with no chance of being RIF'ed or leaving of your own accord) you are paying yourself back, sans penalties. Link to comment Share on other sites More sharing options...
MrsTaborJet Posted March 2, 2008 Author Share Posted March 2, 2008 It's not a withdrawal, it's borrowing, right? So, essentially (and taking into consideration you are a long-time employee with no chance of being RIF'ed or leaving of your own accord) you are paying yourself back, sans penalties. Yeah, you are borrowing your own money and repaying yourself... but who is immune to a RIF? I'm in HR, we RIF'd 100+ IT employees early 2007 and as my company grows with acquisitions there is more and more overlap resulting in more RIFs. Link to comment Share on other sites More sharing options...
Garb Posted March 2, 2008 Share Posted March 2, 2008 Yeah, you are borrowing your own money and repaying yourself... but who is immune to a RIF? I'm in HR, we RIF'd 100+ IT employees early 2007 and as my company grows with acquisitions there is more and more overlap resulting in more RIFs. So true, so true. A friend of mine has worked at Fidelity Investment for 19 years. 19 years. Worked her way up too. Great reveiwes. Received private stock. The whole nine yards. Boom! Her dept was rif'd a month ago - gave the responsibilties to another group in North Carolina and a new group in New Mexico - you know, cheaper labor, cheaper ops costs. It can be ugly out there! Good news though - she just got a new job at Fidelity and starts tomorrow - without missing a beat with her current bene's. Meaning she doesn't have to start over in vacation time, 401k vesting, etc. She is one of the lucky ones. Anyway, you are right. No one is immune to being rif'd. Link to comment Share on other sites More sharing options...
faba Posted March 2, 2008 Share Posted March 2, 2008 So true, so true. A friend of mine has worked at Fidelity Investment for 19 years. 19 years. Worked her way up too. Great reveiwes. Received private stock. The whole nine yards. Boom! Her dept was rif'd a month ago - gave the responsibilties to another group in North Carolina and a new group in New Mexico - you know, cheaper labor, cheaper ops costs. It can be ugly out there! Good news though - she just got a new job at Fidelity and starts tomorrow - without missing a beat with her current bene's. Meaning she doesn't have to start over in vacation time, 401k vesting, etc. She is one of the lucky ones. Anyway, you are right. No one is immune to being rif'd. Yes a big difference in borrowing your own money saved and having what happens like Jet Moses stated if you leave the company. Both options should be a last last resort. Link to comment Share on other sites More sharing options...
drago Posted March 2, 2008 Share Posted March 2, 2008 and the united states have reached a new low. Unreal. If this gets big it will be the same as those start up "mom and pop" creative financing mortgages that send people straight to foreclosure. I guess i don't have much remorse. If you live in a capitalistic country, you might want to learn something about the "do's" and "don't's" of how money works. Link to comment Share on other sites More sharing options...
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