When it comes to saving for retirement, politicians have choices. Those choices affect the people of the USA. On one hand, some have encouraged politicians to eliminate the tax advantages enticing individuals to save through vehicles like 401(k) plans.1 On the other hand, Republicans in the House of Representatives have offered to maintain those tax incentives and create new savings accounts allowing individuals to withdraw contributions and earnings at any time, for any reason, without tax penalties.2
Flexibility is Good…Right?
Flexibility is normally a positive in any investment environment. The current House of Representatives policy agenda seeks to provide increased flexibility for every individual. Maintaining the tax incentives for the 401(k), as well as altering 403(b) and 457(b) plan rules to more closely reflect those for the 401(k) plan, are thought to encourage individuals to continue saving for retirement. If the House Ways and Means Committee were to follow through with the creation of savings accounts allowing people constant access to funds, for any reason, without tax consequences, that would seem to produce more flexibility and result in greater saving for retirement, would it not?
No Substitute for Discipline
The problem is this tendency of human nature: “If access to funds is allowed, access to funds is made.” Every individual and every family should have an fund from which they can withdraw, without tax penalties, to meet the financial requirements of emergencies. However, funds saved and set aside for retirement need to remain untouched until retirement. There are too many stories of couples using IRA account funds to pay off debts leaving insufficient retirement savings. How many ministry personnel have made hardship withdrawals or loans from their 403(b) accounts, for any number of reasons, leaving little or nothing for retirement?
CCPP: Designed for Discipline
Just because your account or the IRS Code allows you access to your funds does not mean such access is encouraged or endorsed. When the Christian Churches Pension Plan was created, access to funds was not allowed until retirement for this specific reason. The Plan exists to provide a monthly income for life after retirement. That is after all, stewardship for your future!
1Cadel, Emily. Mar 16, 2015. USA Today Money. She wants to kill your 401(k)
2Remo, Andrew. July 13, 2016. NAPA Net. GOP Policy Pokes are Retirement Provisions