Should parents be allowed to raid retirement funds to pay for their kids’ needs today?

By: - March 11, 2019 6:31 am

At the state and federal level, politicians who want to address pressing issues without spending public dollars are looking to let individuals mortgage part of their own future for the good of their kids.

One of Pennsylvania’s few remaining moderate southeast Republicans and an arch-conservative former U.S. senator are both pushing plans that would let people tap into retirement incomes early to pay off student loan debt or take paid leave after the birth of a child.

“If you are pro-life it’s not just making sure the baby is born, but it’s about making sure the baby has a healthy life,” Rick Santorum, a former Republican senator from Pennsylvania, told the Capital-Star.

Santorum has been a supporter of paid family leave since at least 2017. He followed in the footsteps of President Donald Trump and daughter Ivanka in backing the policy, which has worked its way into the Republican mainstream.

Citing studies that show paid leave increased the amount of time parents had to bond with their newborns, Santorum said he joined the cause as a way to encourage “pro-family values.”

He backs a plan put forward by Republican U.S. Sens. Marco Rubio and Mike Lee that allows for individuals to pull from Social Security for at least two months. Under the bill, introduced last August, a parent extends their retirement age down the road to make up for the money spent.

Santorum said the delay in retirement would likely be longer than the leave taken.

He said he backs the plan because it provides paid leave without increasing government spending or placing a mandate on private businesses.

Polling from national think tanks finds 74 percent of Americans support 12 weeks of paid family leave. Support falls when a payment method, like cuts to existing programs or increasing taxes, is raised, but 62 percent of Americans are in favor of employers footing the bill.

In Pennsylvania, state Rep. Tom Murt, R-Montgomery, has proposed a plan that takes a similar approach to tackle a different subject — student debt.

Last month, Murt’s office released a memo seeking support from other lawmakers for a bill that would let parents, grandparents, or other family members make a one-time withdrawal from a 401(k) to pay off a relative’s student loan debt.

The plan allows a person to withdraw up to 25 percent of the account penalty- and tax-free.

Murt acknowledged a lot of families don’t have the retirement savings for such a maneuver. But after meeting parents who want some flexibility to help their indebted kids, he thought “this might be a moderate way of addressing some of the student loan obligations.”

Pennsylvania has the second highest rate of student debt in the country, averaging $36,000 per pupil.

While the issues are serious, liberal economists and advocates heaped scorn upon the proposals.

“These are sort of backward approaches,” Mark Price, a labor economist at the Pennsylvania Budget and Policy Center, said.

With America facing down a retirement crisis — nearly half of Americans have $25,000 or less saved for their golden years — Price said it was “totally nuts” to, for example, allow for easier early 401(k) withdrawals.

Instead, he advocated for more public spending to reduce the cost of attending a state school. The Pennsylvania State System of Higher Education’s tuition is on average the third highest among public institutions in the country, according to CollegeBoard.

Heather Arnett, CEO of the Women and Girls Foundation, said states should tap into existing unemployment insurance infrastructure rather than encouraging people to raid Social Security.

This would leave retirement funds secure.

“Any system that encourages Americans to raid their own Social Security benefit is potentially going to thrust millions of seniors into lives of poverty,” Arnett said.

How to fund paid family leave may be a point of contention, but it’s an idea with bipartisan support.

Polling commissioned by the Women and Girls Foundation found that 59 percent of Pennsylvania’s Republican voters back paid family leave. A separate survey by the state Department of Labor & Industry found 78 percent of all Pennsylvanians support the policy.

Santorum chalked up his shift to changing times. Before Trump, there’s no way the policy could have flown with the right, he said.

But backing the idea could give Republicans a chance to gain support among “abandoned working people.”

“Our voters are not the same voters they were 25 years ago,” Santorum said. “We’re no longer the party of suburban college-educated people.”

This story was updated to remove incorrect information about New York’s paid leave law.

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Stephen Caruso
Stephen Caruso

Stephen Caruso is a former senior reporter with Pennsylvania Capital-Star. Before working with the Capital-Star he covered Pennsylvania state government for The PLS Reporter.