Obama's Government Retirement Plan "MyRA"

[s0me0nesmind1]

Wanted to create a topic on this - since I'm a pretty big advocate of properly saving for retirement, especially on the typical topics of tax advantage accounts.

Let me just say, that this is a complete and total waste. No rightful minded retirement planner would EVER advocate for this shit. It seems like a huge marketing ploy to try to get the government more money - since all of it just goes to government bonds.

Don't get me wrong, bonds have a place (Though not government bonds persay) in retirement for certain ages, but a complete lack of equity is just plain stupid.

Furthermore, the people stupid enough to save with this would have be lucky to walk away with anything reasonable for retirement. This wouldn't put the SLIGHTEST dent in a proper amount for retirement. At the same time, someone has to manage all of these funds - normally with retirement programs there are small % fee's, but in an effort to encourage people they are saying that there will not be any fees. Again... someone has to pay the employee's that manage the funds, software, and websites - so it's ultimately coming out of the taxpayers pockets.

Curious what ATOT's thoughts are.

http://finance.yahoo.com/news/obamas-myra-retirement-savings-plan-153040036.html

MyRA, the Obama administration's free, guaranteed-return starter retirement account, launched nationwide on Wednesday.

The government-backed plan is an option for the tens of millions of U.S. workers whose employers don't offer a retirement savings plan. MyRA accounts are open to anyone earning an annual salary of less than $131,000, or $193,000 if they are married and file taxes jointly. There is no minimum to open an account, as with an IRA, and no fee to open one. Payments can go into the plan automatically, directly from a checking or savings account, or from an employer's payroll system, via direct deposit. Any or all of a federal tax refund can be directed into a MyRA account, which is portable from employer to employer.

A MyRA (My Retirement Account) won't return nearly what a stock fund is likely to return over time, but workers face no risk of losing their nest egg. MyRAs will invest only in a U.S. Treasury security guaranteed never to lose value. Users can access the money for emergencies. In short, it operates a lot like a 401(k)—albeit without that crucial match that companies may make on employee contributions—but is effectively a Roth IRA with contributions of after-tax money that can be withdrawn, tax-free, in retirement.

The myRA.gov website notes that "interest earned is the same rate as investments in the Government Securities Fund, which earned an average annual return of 3.19% over the ten-year period ending December 2014." Over the past five years, that rate has dropped to a little over 2 percent, said Treasury officials, noting that"the rate is dramatically higher than what people are able to earn on savings accounts."

Savers can put away up to $5,500 a year, and those who are at least 50 by yearend can contribute as much as $6,500. The guaranteed return lasts until they accumulate $15,000 in the plan or have been in MyRA for 30 years, when they will need to move the money into a private sector product such as a Roth. They're also free to move the money out of MyRA and into an outside retirement product at any prior time.

"This has been a long time in coming," said Olivia Mitchell, professor of business economics and public policy at the Wharton School and director of the Pension Research Council. "Yet it's just a first step, and more needs to be done to enhance retirement security for an ever longer-lived population."

David John, a senior strategic policy adviser at retirement organization AARP's Public Policy Institute, said MyRA is a good tool but not the solution to a “desperate need for additional ways to save for retirement.” MyRA will help many people get started in saving, he said, “but people also need to be able to roll over money into a regular retirement plan, whether it’s a state-sponsored plan or that of an employer." And only about half of U.S. employers, especially in the small business area, offer such a plan.

Treasury Secretary Jack Lew noted in a news conference that "we have been very clear that this is a start, not a finish. People will never build up the retirement savings they need if they don't start."

Treasury officials also noted that "the goal of the program is continuous improvement" and that additional features are planned.

The plan to start MyRA (My Retirement Account) was announced by the administration in the president's State of the Union Address in 2014 and has been in a pilot program with a small group of employers since late last year.

Updated to note that federal tax refunds can be directed into MyRA accounts and to add AARP comments.

edit: And for the record for anyone that is out of the loop on tax advantage accounts... This is simply a ROTH IRA where it is 100% allocated to government bonds. If anything, money should be spent advertising how ANYONE (within income limits) can open an IRA tax advantage account and invest it in whichever fund suits them. For anyone that isn't able to choose for themselves, there are always Target retirement plans.

 

[Genx87]

I agree with Jack, this is a start. But why not allow us lowly citizens access to the federal thrift program?

 

[PokerGuy]

I think encouraging people to save a little bit is a good thing. Especially those of limited means who tend not to save much (if anything) for their retirement.

That said, this particular plan seems like a lousy one. It's just a roth IRA without access to equity investments, you're locked into exclusively government bonds. You're also capped at $15k, which isn't much in terms of retirement savings. Why not simply have the government pick up the tab for people under a certain income level to use regular market roth IRA's?

 

[s0me0nesmind1]

I think encouraging people to save a little bit is a good thing. Especially those of limited means who tend not to save much (if anything) for their retirement.

That said, this particular plan seems like a lousy one. It's just a roth IRA without access to equity investments, you're locked into exclusively government bonds. You're also capped at $15k, which isn't much in terms of retirement savings. Why not simply have the government pick up the tab for people under a certain income level to use regular market roth IRA's?

Exactly, it's taking something that already exists, changing the name of it, and giving you 0 investment options other than 1 shitty one.

It still costs money though, so in the end it's coming out of the taxpayers pocket. I would rather Obama just educate the people through media appearances that anyone can open an IRA with any broker/bank.

 

[EOM]

<itsatrap.jpg>

Guaranteed to NEVER lose value.....
At the expense of other taxpayers in the long run....?

 

[glenn1]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

 

[EOM]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

Interesting idea... any idea on the numbers in the long run? The more invested the more owed..

 

[Slew Foot]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

thats pretty much how i woild have done SS.

 

[boomerang]

I hope everybody and their brother gets on board with this. I'd much rather the .gov have access to your money instead of them coming after mine. They've been wanting to get at private retirement funds for a long, long time. Nancy Pelosi has at least twice and I think it was three times expressed the need to have the government take over retirement accounts for the good of all us uninformed investors. When it comes to money, who knows better than the .gov, right?

What's the harm of letting just the nose of the camel under the tent?

 

[boomerang]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

You know that will never happen, right? The .gov isn't interested in individual accounts. We're in transition to a society based much more highly on the collective than the individual.

With another nice big old slush fund, if Jose in Guatemala has a need, our political class can step in to help him out. That's where they'll tell us the money is going anyway.

We can't trust them in the slightest with the money they're taking from us now. But, I'm absolutely certain that our educational system has cranked out a slew of people that would be very happy to let the .gov take over their retirement planning. Should they ever actually find employment that will support it.

 

[KB]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

That's how it should have been done; however there is zero chance of that now. Payments made today have to go directly to retirees now. There is no time or money available to allow for saving of any sort in SS without leaving current retirees with nothing.

 

[Exterous]

Personally I just want to see an employer independent plan where you can choose your own plan administrator (Vanguard, Fidelity etc) and give your employer the ability to contribute whatever match they chose to give directly to that account. Call it My401(z) or whatever but that way I don't have to worry about whether the company only offers high fee funds or have to pay fees to roll over my account when I change employers or any of that crap

You're also capped at $15k, which isn't much in terms of retirement savings. Why not simply have the government pick up the tab for people under a certain income level to use regular market roth IRA's?

The cap is just the point where you roll over into a traditional IRA/Roth. My guess is that this was the most expedient way get around the minimum funding requirements.

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

The biggest issue I see with that is the increase in access to the money over SS. I am all for SS reform but I don't trust people to keep their money in the account for retirement. There is absolutely an aspect of personal responsibility to that but, as we've found out many many times, if enough people do something stupid we all pay for it regardless of our own level of responsibility in the matter

 

[maddogchen]

I don't have any issues with it. Its trying to get people who don't put money away for retirement to try to. Its for those starters who are trying to scrounge some money to save for retirement and to keep them saving.

You don't want them to jump into stocks where they might see the stock market crash 600 points and for them to go oh no i'm losing money, get it out of there and then they never jump back in. You want them to keep the money in and slowly save until 15k and maybe by then they'll have learned a thing or two and can figure out what proper funds to invest in for a ROTH and move it out of this starter account.

if these people knew enough about what to invest in and didn't worry about jumping into the stock market, then of course this is not for them. They can put it in a ROTH.

edit: also when i first started I remembered that most places required a min of $3000 to start a Roth fund at their place. So I had to save several months at my part time job to get there. So if this was there back then, I might have considered this while saving.

 

[s0me0nesmind1]

I don't have any issues with it. Its trying to get people who don't put money away for retirement to try to. Its for those starters who are trying to scrounge some money to save for retirement and to keep them saving.

You don't want them to jump into stocks where they might see the stock market crash 600 points and for them to go oh no i'm losing money, get it out of there and then they never jump back in. You want them to keep the money in and slowly save until 15k and maybe by then they'll have learned a thing or two and can figure out what proper funds to invest in for a ROTH and move it out of this starter account.

if these people knew enough about what to invest in and didn't worry about jumping into the stock market, then of course this is not for them. They can put it in a ROTH.

I guarantee you - people that are stupid enough to do this and invest in Bonds, are too stupid to check their portfolio performance. The degree of stupidity we are talking about is right along with those that have an employer that automatically enrolls them in a 401k. They could be contributing to it for 2 years straight and have no clue. You think they check the daily balance of their equity values? No way.

I think it's a way of conning people into giving the government more loans with bonds.

 

[maddogchen]

I guarantee you - people that are stupid enough to do this and invest in Bonds, are too stupid to check their portfolio performance. The degree of stupidity we are talking about is right along with those that have an employer that automatically enrolls them in a 401k. They could be contributing to it for 2 years straight and have no clue. You think they check the daily balance of their equity values? No way.

I think it's a way of conning people into giving the government more loans with bonds.

Yes, there are those people too who never check, but you have to reach them through education. And thats a different problem, that this is not trying to address, imo.

 

[Kwatt]

MyQE4?


.

 

[Spungo]

The intent of MyRA is good, but it has a few logical problems. Loaning money to a corporation makes sense because corporations make profits and use the profits to pay interest. The government doesn't make profits. All of its revenue comes from taxation. That means all of the interest paid to these MyRA accounts must come from taxes. You get $1000 interest, but the government needs to raise your taxes by $1000 to pay the interest. It's just nonsense. You can't pay interest to yourself. It just doesn't work.

I don't think the government should encourage any particular investment. If you want to put government bonds in your IRA, go for it. If you want corporate bonds, go for it. If you want stocks, go for it. If you want gold and real estate, go for it. Trying to guide investments into one particular direction causes weird market distortions. Example: the housing bubble was caused by interest rates being too low. Investors couldn't meet pension obligations by buying safe government or corporate debt, so they would "reach for yield" by buying low quality crap bonds called Asset Backed Securities (ABS), which were usually mortgages to people with poor credit. Bubbles are a natural part of any system, such as the beanie baby bubble, but these bubble get bigger and more destructive when they are part of official government policy. Intentionally creating a mortgage bubble was a stupid idea. Intentionally creating a junk bond bubble (which happens almost every decade) was a stupid idea. Trying to create a bubble in government debt is a stupid idea. Just stop trying to create bubbles. Is there even 1 case in history where a bubble has not lead to financial disaster?

 

[alcoholbob]

Sounds like a ponzi scheme to bail out social security, lmao.

 

[boomerang]

Sounds like a ponzi scheme to bail out social security, lmao.

Nobody will ever know where the money goes. They will only be able to hope it's available when the time comes. Our government has a spending problem and it's time for an intervention.

 

[DCal430]

Use it as a vehicle to reform Social Security. SS contributions go into the MyRA account so people have ownership of their SS retirement funds, and convert it into a SS annuity upon retirement as is done today. Removes the political risk of SS as the funds in each personal account would be segregated from the general budget, plus people might care more about running bigger deficits and increased debt if it impacts the current value of the Treasury paper assets in their MyRA accounts.

This is a terrible idea. It shows a lack of understanding on how SS actually works. Your idea would greatly harm the poor while benefiting only the rich. The SS benefits of lower income people are supplemented by the contributions of higher income people. Your plan would remove this resulting in a great reduction in benefit to the poor, while increasing the rich SS benefit.

 

[DCal430]

Interesting idea... any idea on the numbers in the long run? The more invested the more owed..

It would wipe out the benefits of the poor and make the rich better off. It is a plan that attacks the poor.

 

[werepossum]

I'm going to go against the tide and say I'm not really seeing the problem here. If and when our government cannot roll over its bond debt, the stock market is likely to crash like never before. Your Warren Beatty types will be fine, having gotten plenty of warning and with the wealth to either leverage their way out of danger or simply ride it out (if not actually get government to pay them their "losses"), but the unsophisticated small savers such as this program would serve are going to be devastated anyway. At least government will still be interested in pretending to serve you, whereas if your 401K is worth 5% of its high, the managers are going to be concerned only about themselves and their image with future investors, not about you.

We're going to borrow what we are going to borrow in any case. The Democrats pretty much own the media and are committed to making sure the Republicans get blamed for any disruption caused by a refusal to simply raise the debt ceiling whenever we hit it, and honestly I don't think very many Republicans are really willing to make the hard decisions necessarily involved in limiting our descent. To the extent we can shift that borrowing from the Chinese (and Japanese, etc.) to poorer Americans - probably using money that would otherwise be spent on Chinese-made goods - that's a good thing. Yes, we will have to borrow even more money to pay them off either way, but if I'm going to be paying interest I'd much rather pay it to poor Americans than to rich Chinese investors.

 

[ultimatebob]

Silly question, but is the $5,500 a year in addition to what you can contribute to a regular IRA?

If so, it might make for a good tax deduction.

 

[maddogchen]

No, not in addition

 

[simpletron]

Silly question, but is the $5,500 a year in addition to what you can contribute to a regular IRA?

If so, it might make for a good tax deduction.

https://myra.gov/

No, It is literally a Roth IRA with 1 fund and no fees. The fund is the G Fund from the TSP, which is quite good for a government bond fund with super low expense ratio(0.029%). ( https://www.tsp.gov/PDF/formspubs/FundG.pdf ) In addition, the plan stops paying interest at 15K and tells you to transfer into private-sector Roth IRA.

The Plan seems gear for people who don't have the discipline to save, to put their tax refund into it. After a 5 years of the average 2-3K tax refund, the person will have enough cash to avoid minimum fees on a lot of mutual funds in IRAs.

Personally, I would have like to see all the TSP funds opened up. If they did that it would get my money and recommendation, but as it stands with just the G fund ... Meh... just a roth IRA/High interest savings account combo.