Thursday, October 30, 2008

Tapping 401k for Mortgage Payments

There have been bills introduced to allow distressed homeowners to tap their 401k's, without penalty, for mortgage payments. I think this is generally a bad idea, from a social-policy standpoint. Although it is wrenching for a family to lose their house, they can recover. Displaced homeowners will find somewhere else to live--maybe an apartment, maybe renting a house in the same neighborhood, maybe even renting their own house. I don't want to minimize what a blow this would be, but from society's point of view, these are acceptable outcomes.

Whereas if people raid their 401k's in order to make mortgage payments, they are going to arrive at retirement, 20 or 30 years down the road, with nothing. And that is a social problem. So better to lose the house and downsize now, than be without a living in retirement.

1 comment:

  1. The government yet again allowing or more enabling folks to make poor decisions.