August 1, 2008
The Pittsburgh Channel
PITTSBURGH — A company called ReservePlus has created a debit card to withdraw money from your 401(k) or retirement account.
Consumers in a cash crunch can use the card to cut through the red tape of withdrawing retirement funds early.
The card can be used at ATMs and in any store that accepts plastic for payment, Call 4 Action reporter Aaron Saykin said.
Financial planner Rick Sabo told Call 4 Action that it’s “ridiculous” to let people access their pension before retirement. Plus, you could be hit with extra taxes and fees on the money you spend.
“You can’t access money in a pension plan prior to age 59½ without a 10-percent government penalty, plus taxes,” according to Sabo. “So you’re not really just taking some of your money, you’re taking a loan against that money.”
ReservePlus has pointed out that if you use the card, you’re essentially loaning yourself the money, so the interest may be lower than taking a loan from a bank.
“If that money is not paid back, and the money you’re paying on the loan to borrow it isn’t going onto your savings, then you’re going to get to retirement age and not be able to retire. You won’t be able to afford to,” Sabo said.
“I think if you see this starting to gain some steam, you’re going to see Congress step in,” said U.S. Rep. Mike Doyle, D-Forest Hills.