October 14th, 2011
Two Georgia lawmakers have proposed a bill to allow people to use a part of their 401K in order to help pay their mortgage, according to a recent article in the San Francisco Chronicle. This would be a withdrawal from a 401K retirement savings without penalty.
Currently, there is a 10% penalty for withdrawing from a 401K prematurely. In addition, that money would be taxed as any withdrawn early is considered income. This bill would allow homeowners to avoid these fees.
Sen. Johnny Isakson (R-Georgia) and Rep. Tom Graves (R-Georgia) have introduced this bill, called the Hardship Outlays to protect Mortgagee Equity (HOME) Act, in hopes that people who have saved for retirement can use that money to avoid foreclosure.
The bill would allow withdrawal of up to $50,000 or half of the 401K, whichever is smaller. The income tax would still apply, but there would be no 10% penalty. What do you think about this idea, and would you withdraw from retirement savings to help pay your mortgage if it was passed?