Home owners struggling to make housing payments should be a focus for regulators. Many home owners on the edge now will likely face difficulty in the days ahead. Some may even lose their homes.
The Saturday NY Times in an article this past Saturday mentioned a plan by Daniel Alpert. His plan consists of temporarily turning a home owner into a renter for 5 years. I will take the 5 year period from Mr. Alpert's plan. Also recently both presidential candidates mentioned a temporary reprieve on withdrawal penalties for 401k plans. I will use that 401k penalty reprieve.
Now my plan. It allows home owners to withdraw cash from their IRA or 401k. Penalties would still apply but will be considerably less. When a person under 59 years of age withdraws cash from an IRA he is assessed a penalty and required to pay taxes on the income. The penalty is 10%. Under my plan the IRA holder will only be assessed a penalty of 2% for 2009, 4% for 2010, 6% for 2011, 8% for 2012 and 10% for 2013. The regular income taxes would still apply. The maximum amount per year will be $18,000.00.
This plan would allow home owners in trouble to withdraw assets from their retirement accounts to help pay their current needs. The big problem with this plan is that the home owner is 'robbing' his retirement account. This could be very harmful as the money withdrawn from an account will not be gaining in value. Plus the number of years it will take to catch up will require the home owner to place much larger sums into a retirement plan.
That said this becomes a question of which is more important to a person - keeping a home under any circumstance or retiring on schedule. Maybe this decision would be best left up to the home owner. Just my two cents.
I am going to refine this a little but wanted to get the idea out there in the interim.
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