ANOTHER DAY OLDER AND DEEPER IN DEBT

This is not good for you:

A new debit card that lets consumers use ATMs to withdraw money from their 401(k) plans is drawing a sharp reaction from financial planners.

The ReservePlus card is marketed by Reserve Solutions Inc., a New York financial firm that says it has 10,000 cardholders already.

The debit cards allow cardholders to take out loans from their employer-sponsored 401(k) retirement funds. Normally, restrictions on the funds discourage account holders from making withdrawals before they are 59½ years old.

Early withdrawals from 401(k) plans come with taxes and fees, which could deprive account holders of their nest eggs if they fail to replace the money promptly.

..."For every $10 you take out of the account, you only have $6 or $7 to spend, probably closer to $6, which means you're giving up a third of your money," said Stuart Ritter, certified financial planner for T. Rowe Price, a Baltimore asset-management company. "You're also giving up money to spend in retirement, so you are by definition lowering your lifestyle in retirement."...

They just won't stop. They just won't stop making it too easy for people to do financial harm to themselves with easy credit.

We're told by a Reserve Solutions spokesperson that people who borrow this way borrow less than people who take out traditional loans against their 401(k)s, but let's not be naive -- nobody's offering this service as a way to encourage caution and thrift. This is being offered as way of encouraging people to borrow 401(k) money without giving it a lot of thought, and to take out a lot of little loans until the amount really adds up. Anything to keep the cash flowing through the system in the short term -- even if spenders are hurting their long-term financial health.

Much better, if you're in a financial bind, to temporarily cut back on your 401(k) contributions, or suspend them altogether for a while. Much better to take out a loan that requires paperwork and forces you to think about what you're doing. This is a lousy alternative. Don't get sucked in.