Personal retirement accounts will help in next crisis
Congress passed and President Donald Trump signed into law the CARES Act to provide emergency measures to help us get through the economic crisis caused by the COVID-19 shutdown.
A crucial objective was to provide funds to the many individuals who suddenly found themselves cash-strapped and unable to pay bills because, through no fault of their own, they were out of work.
Two major provisions are $1,200 cash payments for individuals, and relaxing rules to allow withdrawal from or loans against IRAs, 401(k)s and other defined benefit retirement plans without penalties or tax consequences.
The cash payments received most of the attention. But the provisions for getting cash from retirement plans were a highly desirable addition. Ideally, it's best to be able to manage through a crisis with your own resources rather than government money.
If there is anything foreseen, it is that the unforeseen will always be part of our lives. We all should manage our personal affairs with this in mind. Living day to day, week to week, paycheck to paycheck is not how anyone should be managing their life.
You might say: "I'm working two jobs. I spend practically nothing on entertainment, and I still barely make it to the end of the month."
And here is where the right government policy can help you be freer to manage your own life.
I've been writing for years that Americans should be allowed to invest their payroll tax in their own personal retirement account. The payroll tax is what's used now to finance Social Security.
Many still think that Social Security is some kind of retirement investment plan. No, it's just another government tax and spend program.
Every year, retirees get Social Security payments. The funds come from the payroll tax that practically every working American pays.