In recent years I've reported on some of the hardest hit markets in the U.S., from real estate to health insurance to retirement plans. In such time, I've seen cyclical paths to recovery, and I've always wondered where there's logic in feeding a crisis with another crisis.
Take the latest House bill from Florida Republican Rep. Bill Posey. The Housing Recovery Act of 2011 would allow plan participants to tap into their accounts early without penalty, if they use it to purchase a foreclosed home.
It's another way to help out the housing market, but I can't help but liken Posey's retirement plan bill to Obama's Cash for Clunkers in 2009. Both are government incentives used to stimulate stale markets, but neither were ever meant to be a panacea. And in reality, probably neither could remarkably sway the markets either way.
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Cash for Clunkers helped boost the car industry – somewhat. An Edmunds.com study found the government actually spent about $24,000 in rebates for each car, instead of the planned $4,000, because the program only propelled sales for a fraction more than the usual inventory.
And even if someone qualified for the rebate — and had decent credit — how responsible was it for lawmakers to encourage a new car purchase to consumers with a bad history of debt?
Circling back to 401(k)s, Vanguard reported late last year most of its 3 million 401(k) plan participants stuck with their investment strategies and continued their regular contributions despite losses in 2008. It paid off: 401(k) balances bounced back by 33 percent in 2010. Maybe they still aren't saving enough, but at least they're getting the point.
In the midst of the worst retirement outlook in recent history, Congress is working hard to ensure millions of retirees will have a secure retirement. Allowing savers to break into their retirement accounts without penalty seems like a step backwards.
With all this encouragement of staying the course, why try to spoil a good thing?
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