It’s a retirement plan policy proposal that will intrigue some and horrify others, and reignites the debate about what deferred savings should and should not be used for.
Conservative syndicated radio talk show host Hugh Hewitt took to the pages of The Washington Post on Saturday to describe a novel idea.
First raised by Sen. James M. Inhofe, R-Okla., it would allow every individual with retirement assets to withdraw up to 25 percent of the assets to pay off existing mortgage debt or purchase a principal residence for the withdrawing taxpayer or a child. It would incur a one-time federal tax of 10 percent (plus applicable state income taxes).
“Americans hold more than $26 trillion in retirement assets, and $6 trillion to $7 trillion of those assets would thus be made available for withdrawal,” Hewitt writes. “Billions of dollars would be paid in the one-time taxes (the revenue!), with mortgages paid off and new homes purchased. Those newly free of mortgages would have more cash on hand, and many renters and children of homeowners would buy a first home.”
Realtors, the National Association of Home Builders, and high-tax states looking at a revenue rush to help ease the transition to the new tax world would shift from opponents to friends of the bill, he added.
“Crucially, far more Americans would be better off under such a tax bill than under either the House or Senate version.”
Thankfully, he notes the objections, that “we can’t allow Americans to drain their retirement assets, as they already save too little,” yet argues that the principal residences are the key retirement asset for most Americans.
“Getting rid of the mortgage on the biggest retirement asset via the use of other retirement assets has long been the big gap in our retirement laws, but Congress can remedy that. And in so doing, legislators can make millions of Americans’ retirements more secure, provide a huge stimulus to the housing sector and reduce the debt that most Americans labor under,” he concludes.