Should employees be allowed to use their retirement nest egg to save them from foreclosure? Some on Capital Hill think so.
The HOME Act was just introduced in the House and Senate. It would allow Americans to make withdrawals, penalty free, from their retirement accounts to make mortgage payments.
The amount of funds able to be withdrawn from an account for mortgage payments would be capped at $50,000 — or one half of the account’s value (whichever is smaller).
Any funds withdrawn under the HOME Act must be used to make mortgage payments within 120 days, and deferred income tax on the funds would still need to be paid to the IRS.
Is using 401(k) funds to pay the mortgage a good idea? Not if it’s only going to push back — and not completely prevent — foreclosure, say some financial advisers.
If foreclosure looks inevitable, don’t blow your retirement next egg to save something that can’t be saved, they advise.
The goal of the new legislation: Improve the economy.
U.S. Senator Johnny Isakson (R-GA) and U.S. Representative Tom Graves (R-GA), who introduced the bill, say the key to stabilizing the economy is getting the housing market back on track.
“I firmly believe that economic recovery in this country will not occur until the housing market bounces back. To that end, this legislation will help strengthen the American housing market because it will lead to a reduction in foreclosures and in turn will help stabilize home values,” said Isakson of the bill.
Do you think allowing 401(k) withdrawals to make mortgage payments is a good idea? Share your opinions in the Reply box below.
