Assistance programs blocking retirement savings.

iVillage Member
Registered: 05-31-2011
Assistance programs blocking retirement savings.
1
Tue, 05-31-2011 - 11:11pm

I'm not sure if this is true. I wouldn't even know where to look for answers.

My sister told me just recently that because she is on daycare assistance, she is not eligible to contribute to a 401k. I completely understand the reasoning of this. We don't need people on welfare putting 50% of their paychecks away to be millionaires when they reach retirement age.

But it seems ridiculous that they would outright ban it. They are setting these people up to be poor for the rest of their lives. Why not let them contribute but no more than, say 3%. My sister, working at Walmart would be also getting Walmart's match of 3%.

The point of assistance programs is to help people until they can stand on their own 2 feet. People are poor for many different reasons but they usually involve bad financial planning. Why would we force them to continue their bad habits of poor financial planning.

iVillage Member
Registered: 03-03-2009
I have never heard of "daycare assistance". A state or community program? There may be more information on her state's website to corroborate what she told you. Or you could try http://www.acf.hhs.gov/programs/ccb/parents/

The reasoning behind an inability to contribute to a 401K plan is probably along these lines: IF you can afford to save money, then you have enough money to pay for services like daycare.

BTW, much more onerous restrictions are placed on Medicaid recipients. They have to be darn near destitute to qualify.

If your sister wants to save money on her own, that's certainly her prerogative. There won't be a matching employer contribution but at least she will have started on a habit which usually serves well over a lifetime.

Jabberwocka