Note from the amiss

What's wrong with this picture?

The government allows us to save money, tax deferred, toward our retirement. It's called a 401K and most of us babboomers have been doing this for various lengths of time. Currently we have 10% plus unemployment, causing some of us to have to tap state and federal umenplotyment funds, in to which we have payed for years. We now discover (media reports) that up to 40 states have ballooning budget deficits and some may be close to bankruptcy.

Some part of the baby boom generation are now unemployed and not all have glitzy severance packages. Some got no warning and no severance at all. That means using the above mentioned unemployment funds for daily living. Some have a 401K to which they have contributed for years.

What would be the affect of declaring a moritorium on the 20% penalty on 401K funds withdrawn before age 59? The owner of the 401K would still have to pay taxes on the money withdrawn. Would the money withdrawn help relieve pressure on state unemployment funds? Would it not increase the income tax collections realized by the individual states (those who have a state income tax) and therefore reduce deficits? It would also relieve some of the pressure on the states unemployment funds. I realize this would put a little more control of our savings and investments in to our hands, but on the other hand it just accelerates a tax we would eventually have paid anyway.

Something for your consideration with the morning coffee.