Two Georgia legislators recently introduced a bill in Washington D.C. that would allow people to pull money from their retirement accounts penalty free if they use it to pay for their mortgages, The Atlanta Journal-Constitution reports.
While this may be a well-meaning attempt to solve the mortgage crisis that has hammered our country, this by no means is a good idea.
Filing for bankruptcy in Modesto is a much smarter move if you are struggling to make mortgage payments.
Here's why. In bankruptcy, retirement funds are protected from creditors. Without money stored away for the future, you'll be robbing from your retirement in order to save a house that likely has lost its value. Even if a person wants to stay in their house, bankruptcy can help.
As Modesto bankruptcy lawyers have seen time and time again, people can file for bankruptcy and stay in their home during the process even if they've missed payments. They ften can stay in their home with a modified payment plan after bankruptcy has ended.
Or, after all their debts have been discharged, they can be debt free and can start a new life without credit card balances or other debt. It makes much more sense to go that route that throw away whatever long-term savings you have.
Sen. Johnny Isakson and Rep. Tom Graves have said they believe their bills would help people stay in their homes in these difficult economic times.
Isakson said he doesn't think that the country will be able to recover financially until the housing market turns around. He said he believes the legislation would reduce foreclosures and "stabilize home values."
Graves said many Americans who have saved up for retirement are now out of work and the current tax laws don't allow for withdrawals without paying a 10 percent penalty. The law, he said, would quash that penalty for those using the money for their houses. He believes this will cut down on late payments, foreclosures and help boost the economy.
Maybe this would help the economy and it would be fine to have that option available, but tossing away your retirement to save a house can't be a strong consideration for most people. A house is a necessity, but so is having the money stored away for food, medical care and other cost-of-living expenses when you can no longer work.
While the economy is bad and jobs are scarce, being at an age where a person can still work makes it a lot easier to one day build a secure retirement. For older consumers who can no longer earn a paycheck, tossing away your savings is not a smart plan. It would be better to lose a house, get rid of existing debt through bankruptcy in Modesto and start to repair your credit without touching your retirement accounts.
If you or someone you know needs to speak to an experienced and knowledgeable bankruptcy lawyer in Modesto or Stockton, contact the Law Offices of Robert J. Anaya for a free and confidential appointment. Call today 1-209-522-7500.
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Legislation to allow retirement withdrawals to pay mortgages, by Christopher Quinn, The Atlanta Journal-Constitution