- 10,346
Obama's MyRA
- Thread starter CMS
- Start date
- 15,041
Oh, even better then. Per person, the debt is roughly $55,000. So they are going to confiscate accounts that are 1/11th of that at max, and not everyone will have one?
Just because someone doesn't agree with your philosophy doesn't necessarily make them evil.
- 8,707
My question is why do we need something new. This exists already in the form of a IRA savings account. If your employer allows (and you would need the same allowance for myRA) a second direct deposit to your IRA savings account could work. Also if you want a simple retirement plan reallow sar-seps.
- 15,041
Yes, but how many people even know about it? Or what about the unbanked?
I'm not saying this is the best idea out there, but it is hardly evil. Also, I think it will reach a segment of the population that otherwise wouldn't save. Of course, most of them still won't save even with this option.
That's not true. Obama told these people to buy health insurance. They flocked to the exchange for that...
- 8,707
My only issue is why do we need a new venture when what exists now does the same thing. For those who don't know about the IRA savings account how many do you think watch the state of the union.
I do not dislike this idea it will be the source of roll over or starter premiums down the road.
Actually it's $15k. At least according to this article.
http://www.cnbc.com/id/101373440
"But once your MyRA balance reaches $15,000, you'll have to roll it over into a privately managed IRA."
- 10,346
I read that same article and I swear it said $5k! lol. Maybe it was a typo that they went back and changed. Or maybe I just misread.
While there are few details available about the actual structure and makeup of MyRA, here are the details we know so far.
MyRa's would be structured like a Roth individual retirement account. Similar to savings bonds, the investments would be backed by the federal government.
Because the investments would be structured like savings bonds, there would be principal protection, meaning the account balance couldn't go down.
There would be an initial pilot program for companies to sign up to offer the accounts to their employees, and firms have until the end of 2014 to participate in the initial phase.
Workers would be allowed to invest if they make less than $191,000 a year.
There would be NO tax penalty if the investments are withdrawn.
Initial investments could be as low as $25 with subsequent investments as low as $5. These investments could be automatically deducted from an individual's paycheck.
Once an individual accumulates $15,000, or they have the same account for 30 years, it would have to be rolled over into a traditional IRA.
Here are my initial thoughts.
1) While the President said that these "MyRA Savings Bonds" would offer a "decent" rate of return, he did not disclose how these investments would be structured. However, if we assume that these accounts will offer the same variable interest-rate return as the Thrift Savings Plan Government Securities Investment Fund, that rate of return was 1.47% in 2012 while the rate of inflation, based on CPI, ticked up 2.08%. With interest rates now bottoming, and many expect a continued rise in the future, that rate of return may continue to be less than the rate of inflation for the foreseeable future.
2) As I have discussed in the past, the large majority of American's live paycheck to paycheck. American's do not lack for a vehicle to invest savings in for retirement (Roth IRA's, IRA's, 401k's, SEP's, etc.) but lack the ability to save.
3) The problem that needs to be addressed is from the economic front. With 92.8 million individuals excluded from the work force, 1 in 3 American's on some sort of Government assistance, stagnant wage growth over the last 5 years and 1 in 5 on food stamps, the issue is about employment rather than saving. Solve the employment problem in America and the retirement savings dilemma will begin to resolve itself.
4) There is no real incentive for anyone to actually use the "MyRA" as it has a limit of $15,000 for retirement but rather a high-yield, government guaranteed, savings account. Since there is no penalty to withdraw money from the MyRa at any time there is also no incentive to use it to actually save for retirement. However, if we assume that the rate of return is equivalent to Thrift Savings Plan of 1.47% that is significantly higher than what banks currently pay. The incentive will be to use the MyRA to save for future consumption rather than future retirement.
5) Investors have a VERY poor track record of investing in the financial markets and typically fall prey to the emotional mistake of "buying high and selling low." Given that the MyRA has to be transferred to an IRA after reaching $15,000, the guarantee of a "protected investment with a decent return" is gone. Furthermore, there is a disincentive to reach the $15,000 level as it will change the account from a NO PENALTY withdrawal to one with a 10% withdrawal penalty prior to the age of 59 1/2.
6) Lastly, the limit of $15,000 on the MyRA is rather pointless. If the goal is to help people fund their future retirement, the limit is rather ridiculous. Today, if you assume that a portfolio of bonds could deliver an annualized living income of 4%, a retired couple could look forward to living a middle income lifestyle once you factor in social security income. However, such an asset level only exists at the top 10% of the population leaving a large swath of individuals undersaved and underprepared for retirement. A $15,000 MyRA account is going to do very little to change the dynamic of the lower 90%.
Hopefully, this time, "if you like your current retirement plan" you will actually be able to keep it.
MyRA - More About Getting Votes Than Helping Middle Class | Zero Hedge
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Again this isn't about plugging the hole with funds from underutilized treasury iras from lower middle class Americans, its about CONTROL, and laying the foundation to confiscate a portion of IRA's from those that have them already...
MyRa's would be structured like a Roth individual retirement account. Similar to savings bonds, the investments would be backed by the federal government.
Because the investments would be structured like savings bonds, there would be principal protection, meaning the account balance couldn't go down.
There would be an initial pilot program for companies to sign up to offer the accounts to their employees, and firms have until the end of 2014 to participate in the initial phase.
Workers would be allowed to invest if they make less than $191,000 a year.
There would be NO tax penalty if the investments are withdrawn.
Initial investments could be as low as $25 with subsequent investments as low as $5. These investments could be automatically deducted from an individual's paycheck.
Once an individual accumulates $15,000, or they have the same account for 30 years, it would have to be rolled over into a traditional IRA.
Here are my initial thoughts.
1) While the President said that these "MyRA Savings Bonds" would offer a "decent" rate of return, he did not disclose how these investments would be structured. However, if we assume that these accounts will offer the same variable interest-rate return as the Thrift Savings Plan Government Securities Investment Fund, that rate of return was 1.47% in 2012 while the rate of inflation, based on CPI, ticked up 2.08%. With interest rates now bottoming, and many expect a continued rise in the future, that rate of return may continue to be less than the rate of inflation for the foreseeable future.
2) As I have discussed in the past, the large majority of American's live paycheck to paycheck. American's do not lack for a vehicle to invest savings in for retirement (Roth IRA's, IRA's, 401k's, SEP's, etc.) but lack the ability to save.
3) The problem that needs to be addressed is from the economic front. With 92.8 million individuals excluded from the work force, 1 in 3 American's on some sort of Government assistance, stagnant wage growth over the last 5 years and 1 in 5 on food stamps, the issue is about employment rather than saving. Solve the employment problem in America and the retirement savings dilemma will begin to resolve itself.
4) There is no real incentive for anyone to actually use the "MyRA" as it has a limit of $15,000 for retirement but rather a high-yield, government guaranteed, savings account. Since there is no penalty to withdraw money from the MyRa at any time there is also no incentive to use it to actually save for retirement. However, if we assume that the rate of return is equivalent to Thrift Savings Plan of 1.47% that is significantly higher than what banks currently pay. The incentive will be to use the MyRA to save for future consumption rather than future retirement.
5) Investors have a VERY poor track record of investing in the financial markets and typically fall prey to the emotional mistake of "buying high and selling low." Given that the MyRA has to be transferred to an IRA after reaching $15,000, the guarantee of a "protected investment with a decent return" is gone. Furthermore, there is a disincentive to reach the $15,000 level as it will change the account from a NO PENALTY withdrawal to one with a 10% withdrawal penalty prior to the age of 59 1/2.
6) Lastly, the limit of $15,000 on the MyRA is rather pointless. If the goal is to help people fund their future retirement, the limit is rather ridiculous. Today, if you assume that a portfolio of bonds could deliver an annualized living income of 4%, a retired couple could look forward to living a middle income lifestyle once you factor in social security income. However, such an asset level only exists at the top 10% of the population leaving a large swath of individuals undersaved and underprepared for retirement. A $15,000 MyRA account is going to do very little to change the dynamic of the lower 90%.
Hopefully, this time, "if you like your current retirement plan" you will actually be able to keep it.
MyRA - More About Getting Votes Than Helping Middle Class | Zero Hedge
----------
Again this isn't about plugging the hole with funds from underutilized treasury iras from lower middle class Americans, its about CONTROL, and laying the foundation to confiscate a portion of IRA's from those that have them already...
- 15,041
I have to disagree with you. This is grasping at straws to both help people and have a positive legacy. Obamacare, his defining piece of legislation, has become more of an albatross than anything.
He is a lame duck with a Congress that has absolutely no desire to help him realize his policy goals. So now he is grasping at straws to have something positive about his legacy other than just being the first African-American President. Heck, most of them see Bill Clinton as that anyway.
And I have to disagree with you about seizing IRAs. There is nothing to gain and plenty to lose by trying. To even try risks being destroyed in the media and public opinion. If you succeed, then the people will lose even more faith in the government and basically makes social security the sole source of retirement income for all Americans. People will be afraid to invest in any retirement account for concerns the government will just take it as well. Savings will disappear and all that will be left are investments which are dominated by the wealthy.
