{"id":291831,"date":"2021-07-06T15:01:00","date_gmt":"2021-07-06T12:01:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/encore-proposed-legislation-would-allow-1000-penalty-free-401k-withdrawal\/"},"modified":"2021-07-06T15:01:00","modified_gmt":"2021-07-06T12:01:00","slug":"encore-proposed-legislation-would-allow-1000-penalty-free-401k-withdrawal","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/encore-proposed-legislation-would-allow-1000-penalty-free-401k-withdrawal\/","title":{"rendered":"#Encore: Proposed legislation would allow $1,000 penalty-free 401(k) withdrawal"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4073e26ee08\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4073e26ee08\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/encore-proposed-legislation-would-allow-1000-penalty-free-401k-withdrawal\/#Maybe_its_time_to_rethink_adding_a_credit_card_to_401k_accounts\" >Maybe it\u2019s time to rethink adding a credit card to 401(k) accounts<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/encore-proposed-legislation-would-allow-1000-penalty-free-401k-withdrawal\/#Alicia_H_Munnell\" >Alicia H. Munnell<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Encore: Proposed legislation would allow $1,000 penalty-free 401(k) withdrawal<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Maybe_its_time_to_rethink_adding_a_credit_card_to_401k_accounts\"><\/span>\n  Maybe it\u2019s time to rethink adding a credit card to 401(k) accounts<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000326476\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000326476\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Senators James Lankford (R-OK) and Michael Bennet (D-CO) introduced the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.lankford.senate.gov\/news\/press-releases\/lankford-bennet-encourage-retirement-savings-and-leave-room-for-family-emergencies\" class=\"icon none\">Enhancing Emergency and Retirement Savings Act of 2021<\/a>, which would allow 401(k) participants one penalty-free distribution of up to $1,000 each year to deal with financial emergencies.\u00a0<\/p>\n<p> \u00a0The rationale is that low-paid workers are more likely to save if they know they have access to their money if they should need it. Indeed, the empirical evidence clearly shows that employees are more likely to participate in and to contribute more to a plan that offers loans. That makes sense. People feel better if they think their money is not totally locked up.\u00a0<\/p>\n<div class=\"paywall\">\n       Read: Worried about retirement? Welcome to the club<\/p>\n<p>And, certainly, access is an important consideration behind using Roth accounts \u2014 where participants can withdraw their own contributions without penalty \u2014 for the Auto-IRA programs up and running in California, Illinois and Oregon.\u00a0\u00a0<\/p>\n<p>My favorite idea for access, however, is an old plan put forth in the 1990s by the late Franco Modigliani, an MIT economics professor and Nobel laureate, and Francis Vitagliano, an employee benefits practitioner and friend. Under the Modigliani-Vitagliano plan, employees could have convenient access to a limited amount of their 401(k) money through a credit card.<\/p>\n<p>The proposal was criticized by all factions at the time, many of my colleagues still think it\u2019s a terrible idea, and it has failed commercially. But I liked it then, and I still like it. So, let me try again.<\/p>\n<p>The credit card proposal would involve no hassle or expense for the employer. It would be administered by a third party, such as Master Card<br \/>\n        MA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/207581792\/composite\" class=\"positive\">+1.17%<\/bg-quote><span>,<\/span><br \/>\n       Visa<br \/>\n        V,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/203660239\/composite\" class=\"positive\">+1.48%<\/bg-quote><span>,<\/span><br \/>\n       or American Express<br \/>\n        AXP,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/203805826\/composite\" class=\"positive\">+0.93%<\/bg-quote><span>,<\/span><br \/>\n       so any cost would be paid by the credit card user.\u00a0<\/p>\n<p>Read: Why someone 30 years older than you \u2014 or younger \u2014 could be the key to your next job<\/p>\n<p>The card would be great for employees. Credit card users who don\u2019t pay their full balance each month face average interest charges of about 16%. Low-income households often turn to \u201cpayday\u201d lenders, who charge considerably more. With a 401(k) card, the cost would be the market-based interest rate on the 401(k) loan and a service charge, considerably less than current arrangements.<\/p>\n<p>Wouldn\u2019t such a product undermine retirement saving? No. The loans could be limited to a maximum of, say, $5,000, and they would have to be paid back in a maximum of five years as prescribed by the Department of Labor and the Internal Revenue Service. If the loan were not repaid, it would be considered a withdrawal and subject to taxes and penalties.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Wouldn\u2019t such a product just encourage people to run up more credit card debt? Again, no. The average consumer already has 3 or 4 credit cards and receives weekly solicitations to add to that supply. They can already borrow more than they are currently borrowing, as evident in the fact that the lines of credit are several times larger than the average credit balance outstanding. There is no reason or evidence to suggest one more credit card would increase overall borrowing. On the other hand, if consumers gain access to a card with better rates, they tend to consolidate their debts. Such consolidation could well occur with a 401(k) card.<\/p>\n<p>So I think the product is great. But in addition to the widespread theoretical opposition, it was a commercial failure. The 401(k) credit card was presented to the market in 2012, using a Visa card. The card was accepted and implemented by <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roximately 20 employers and offered to their 401(k) participants. The employers were small, with 25-150 employees. Less than 20 participants in total (over a period of approximately one year) set up a 401(k) card account, and these accounts saw very little activity. After approximately 18 months, the 401(k) card project was terminated.\u00a0\u00a0<\/p>\n<p>But I don\u2019t think that should be the end of the story. 401(k) plans need to be revamped. Auto-enrollment and auto-escalation in default contribution rates need to be mandatory components of these plans. Why not make the credit card a default in the revamped plan? \u00a0<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Alicia H. Munnell\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Alicia_H_Munnell\"><\/span>Alicia H. Munnell<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-74FB-4CA39E1DCF40%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Encore: Proposed legislation would allow $1,000 penalty-free 401(k) withdrawal&#8221; Maybe it\u2019s time to rethink adding a credit card to 401(k) accounts Senators James Lankford (R-OK) and Michael Bennet (D-CO) introduced the Enhancing Emergency and Retirement Savings Act of 2021, which would allow 401(k) participants one penalty-free distribution of up to $1,000 each year to deal&#8230;<\/p>\n","protected":false},"author":1,"featured_media":291832,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-291831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/291831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=291831"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/291831\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/291832"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=291831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=291831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=291831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}