Wednesday, July 23, 2008

Tapping your pension with a debit card?

Tapping the 401K and unrealized gains

This is an appalling new trend in America: tapping your pension at the cashpoint. I just picked up on a MarketWatch article about 401(k) debit cards through Tim Iacono's blog. It marks a pretty astounding trend in financial innovation. Debit cards are straightforward. You use them for purchases and money is deducted from your bank account. But when the debited account is your 401(k) retirement plan, critics angrily line up to take a swipe at that piece of plastic. It's not hard to see why. 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.

Posted by edwardnh @ 06:43 PM (680 views)
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One thought on “Tapping your pension with a debit card?

  • Not to mention the potential for tax avoidance.
    You pay money into the 401k, get tax relief on it, and borrow it back.
    Mention that, and I think the government will stop it pretty quickly.

    That is the main reason why such things aren’t allowed here.

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