News: Senate looks to ban 401(k) debit cards

September 5, 2008

Two legislators want to rid the nation of what they view as a particularly insidious product: debit cards linked to 401(k) accounts.

Two legislators want to rid the world of what they view as a particularly insidious product: a debit card linked to a 401(k) account. "These debit cards allow a participant to use his or her retirement savings to make everyday purchases, like buying a cup of coffee. Clearly that's not what the 401(k) is for," says Senator Chuck Schumer (D-New York), who is co-sponsoring the bill with Senator Herb Kohl (D-Wisconsin). Schumer claims that for every $1,000 an investor pulls from a 401(k) plan, he or she loses $10,000 in retirement income. Schumer introduced similar legislation in 1996, which was enough to spook Bank One into dropping plans for its 401(k)-linked debit card. However, now that the concept has been revived, Schumer says he'll see that the bill becomes law "no matter what" this time.