Run From 401k Debit Cards

Did you even know that there was such a thing as a 401k Debit Card? If not, you're better off not knowing. There are times when products are created that are really bad for you and this is one of those times. What this card allows you to do is siphon off money from your retirement account for purchasing whatever you want whether it's movie tickets, a cruise for two or groceries for the week.

This is a very dangerous time to be offering such a product because people are hurting and they are tapping in to their 401ks to live. But making it really easy means they won't look at other ways to get by such as selling used things, getting a second job, etc. What's really insidious about these 401k Debit Cards is that you can slowly chip away at your retirement nest egg with the equivalent of an ice pick, a few dollars here, a few dollars there. Just the way you can build up a big credit card balance with meaningless repetitive spending, you could totally wipe out your future with one of these cards in your wallet. And don't think you won't incur the 10% penalty for early withdrawal because you will. The providers have some efficient way of tacking that on to your charges - plus you'll be taxed on the money as if it was ordinary income. What a bad deal!

I think those people that get these cards with the best of intentions will just wake up one day and realize they have $100 to retire on. If you're even thinking about getting one of these cards, I suggest you run for your life in the other direction.