| | Merlin:
Then taking out a mortgage is thwarting that incentive as well.
The pension plan must still be paid back. Five years, ten years, 30 years, same thing.
In fact, worse if not paid back. (More revenue owed the government as taxes, fees and interest.)
A mortgage must be paid back.
A loan from pension plan assets must be paid back.
Debt is debt to the debtor, but debt is an asset to the debt holder...whether that debt holder is your pension plan or your banker. The tax obligation does not go anywhere, is not reduced; in fact, it is enhanced(with interest and penalties.) THe loan from a regulated pension plan creates a debt interest by the government -- they once granted a tax deduction to encourage this deferred consumption. That tax deduction is actually a tax deferral.
The incentives are the same; the end result after 30 years is the same:
1] Mortgage paid off.
2] Pension plan fully funded and taxable when withdrawals are made.
You are doing a great job playing devil's advocate and trying to explain the government's rationale.
My point is, there is no rationale; it is -purely- a product of third parties lobbying Congress and shepherding the assets of others -- the capital that the self employed and middle class scrape up -- earn themselves -- to funnel capital into the hands of third parties, who then turn around and loan that same capital(perhaps after some transactional water muddying) back to the same people who provided the capital to begin with -- earned it -- as pension assets.
Because not all regulated pension plans can be borrowed against, and the deciding factor is not logic or economic necessity or sound accounting principles, the deciding factor is the lobbying of special interest banking groups, period.
regards,
Fred
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