Obama's "myRA" Proposal - Your Thoughts?

[s0me0nesmind1]

I'm curious what others here think of his recent proposal.

As a finance person myself, I'm actually pretty torn. On one hand, I'm a huge advocate for being prepared for retirement. On the other hand, it just looks like more of the government digging into our wallet. You can say it's to help people retire - but Isn't that what social security is for? Yes, that is what social security was intended to be for.

First and foremost take it for what it is: The default action of the myRA program will buy treasury bonds. What that is is obvious -- it's a scumbag way of getting people to give the government more money. Fin. It's taking advantage of people who don't look at their paycheck options and pulling directly from their paychecks.

I don't disagree - most people don't do enough research about financial options. But that simply comes from not educating themselves enough. We can't fix that by making people shit investment accounts for government bonds. We CAN fix that by fixing our education system and instead of requiring Physical education and electives for 4 years in high school have a mandatory year of Finance 101. Is that too much too ask?


Article for reference: http://finance.yahoo.com/news/obama-hopes-myra-first-step-081739707.html

 

[MomentsofSanity]

As a broker myself and an IRA specialist I'm also torn. I like the idea but I'm curious how it will be set up etc... I just don't think there's enough information right now to really make up my mind.

 

[Texashiker]

Obama's "myRA" Proposal - Your Thoughts?]

From what I read it would be like a guaranteed deposit that can not lose money.

That is a big plus factor for me. Just about every 401k I have had has lost money. One company was losing 20% of my investment every quarter. When I called them to see what the problem was, they refused to answer any questions about where the money went. They told me they do not tell clients where their money is invested. That told me they were hiding something. How can professional investors lose money when the stock market is hitting all time highs.

Over the past few years the federal reserve with its massive bond buying program has inflated wall street profits, but those profits have not found their way into my 401k.

The people need a reliable retirement savings fund that pays more interest than the rate of inflation.

But if there is a way for wall street to steal that money, they will find a way to do so. The money needs to be secure and safe from those greedy wall street bankers.

 

[s0me0nesmind1]

As a broker myself and an IRA specialist I'm also torn. I like the idea but I'm curious how it will be set up etc... I just don't think there's enough information right now to really make up my mind.

The main emphasis was on paycheck deduction so that people are doing so with little or no knowledge. This is something that will doubtfully be explained to everyone everytime they get a job. They are hoping it's on people's paychecks and they just continue with life nonchalant.

 

[hal2kilo]

Is Wall Street going to get any action out of this like 401K's or IRA's? If not, it's not going to happen.

 

[s0me0nesmind1]

From what I read it would be like a guaranteed deposit that can not lose money.

That is a big plus factor for me. Just about every 401k I have had has lost money. One company was losing 20% of my investment every quarter. When I called them to see what the problem was, they refused to answer any questions about where the money went. They told me they do not tell clients where their money is invested. That told me they were hiding something. How can professional investors lose money when the stock market is hitting all time highs.

Over the past few years the federal reserve with its massive bond buying program has inflated wall street profits, but those profits have not found their way into my 401k.

The people need a reliable retirement savings fund that pays more interest than the rate of inflation.

But if there is a way for wall street to steal that money, they will find a way to do so. The money needs to be secure and safe from those greedy wall street bankers.

Clearly an example of someone that needs a finance class.


The default investment is federal government bonds. Yes, it is a "guaranteed" investment that can't lose money, because the only way to not get your interest is if the government collapses. If you think you're ever going to retire or get ANYWHERE NEAR retirement funds with crap interest of government bonds you're out of your mind.

Is Wall Street going to get any action out of this like 401K's or IRA's? If not, it's not going to happen.

From what I understand, it will be much like today's IRA in that you will be able to choose a few options in investment (we don't know what those are or will be yet). What we do know is the DEFAULT investment that most will not notice or not know how or what to change, which is government bonds.

 

[fskimospy]

I sincerely doubt that this program was put into place in order to depress treasury bond rates.

Seems like a perfectly reasonable program, although I question how much it will actually end up doing to help people with retirement.

 

[fskimospy]

Also, sadly, there is little evidence that financial education helps people make better money decisions.

 

[s0me0nesmind1]

Also, sadly, there is little evidence that financial education helps people make better money decisions.

...How do we know if we have never have it.... ?

 

[JockoJohnson]

From what I read it would be like a guaranteed deposit that can not lose money.

That is a big plus factor for me. Just about every 401k I have had has lost money. One company was losing 20% of my investment every quarter. When I called them to see what the problem was, they refused to answer any questions about where the money went. They told me they do not tell clients where their money is invested. That told me they were hiding something. How can professional investors lose money when the stock market is hitting all time highs.

Over the past few years the federal reserve with its massive bond buying program has inflated wall street profits, but those profits have not found their way into my 401k.

The people need a reliable retirement savings fund that pays more interest than the rate of inflation.

But if there is a way for wall street to steal that money, they will find a way to do so. The money needs to be secure and safe from those greedy wall street bankers.

I manage my own 401k. I diversify. You can too. If you put all of your 401k into the bonds portion or savings portion of 401k instead of stocks, you won't lose money either. You won't make much extra as well --- just like with this MyRA. It is like a guaranteed savings account that at least puts some money away for those that want to.

 

[fskimospy]

...How do we know if we have never have it.... ?

Uhmm, lots of places offer financial education. Studies have tracked how students do who have had it as compared to a control group. Their results are not promising.

 

[Texashiker]

Clearly an example of someone that needs a finance class.

That is why I give my money to a 401k where professionals are supposed to invest it and make me money.

One company I worked for, some people from the 401k company visited the employees and tried to explain why our 401k was losing so much money.

One of the employees stayed up on the stockmarket and had his own investments.

The employee countered the people from the investment company saying if you had invested into Coke or Exxon we could have had a nice return. This was back in 1993 and 1994. The company refused to explain why they were losing money when the stock market was up 12%. The people from the 401k refused to answer any detailed questions about where the money was invested and why they were losing money.

To me the 401k market is a scam or a gabble at best. You can lose money and nobody is held responsible. You money is at the whelm of whatever investment the firm wants to make. If you lose money, too bad.

 

[Genx87]

I think this would be a viable option for many people. I'd participate if possible. But I also need to know the details of the program. Like, will it be funded like a 401k(pre-tax earnings) or RothIRA(after tax earnings). And will it be a lockbox solution? I suspect it will but who knows with these politicians. And will the funds be limited to a set of funds\bonds or can it be self directed?

 

[Genx87]

That is why I give my money to a 401k where professionals are supposed to invest it and make me money.

One company I worked for, some people from the 401k company visited the employees and tried to explain why our 401k was losing so much money.

One of the employees stayed up on the stockmarket and had his own investments.

The employee countered the people from the investment company saying if you had invested into Coke or Exxon we could have had a nice return. This was back in 1993 and 1994. The company refused to explain why they were losing money when the stock market was up 12%. The people from the 401k refused to answer any detailed questions about where the money was invested and why they were losing money.

To me the 401k market is a scam or a gabble at best. You can lose money and nobody is held responsible. You money is at the whelm of whatever investment the firm wants to make. If you lose money, too bad.

Diversify, seriously. If your 401k is investing individual stocks you run the risk of massive ups and downs. If they refused to answer questions find a new manager. I'd suggest to you to invest in the vanguard 20xx funds.

 

[s0me0nesmind1]

Diversify, seriously. If your 401k is investing individual stocks you run the risk of massive ups and downs. If they refused to answer questions find a new manager. I'd suggest to you to invest in the vanguard 20xx funds.

Index funds in general is where it's at.

They diversify it. They restructure it as the years go by. You do nothing.

 

[fskimospy]

I think this would be a viable option for many people. I'd participate if possible. But I also need to know the details of the program. Like, will it be funded like a 401k(pre-tax earnings) or RothIRA(after tax earnings). And will it be a lockbox solution? I suspect it will but who knows with these politicians. And will the funds be limited to a set of funds\bonds or can it be self directed?

Lockbox in what way? It just sounds like purchases of treasury bonds.

 

[fskimospy]

Index funds in general is where it's at.

They diversify it. They restructure it as the years go by. You do nothing.

Basically everyone should invest in index funds unless you have some extraordinary reason not to.

Other people invest for a living, you do not. They will almost certainly be better than you at it. Don't play their game.

 

[Londo_Jowo]

From what I read it would be like a guaranteed deposit that can not lose money.

That is a big plus factor for me. Just about every 401k I have had has lost money. One company was losing 20% of my investment every quarter. When I called them to see what the problem was, they refused to answer any questions about where the money went. They told me they do not tell clients where their money is invested. That told me they were hiding something. How can professional investors lose money when the stock market is hitting all time highs.

Over the past few years the federal reserve with its massive bond buying program has inflated wall street profits, but those profits have not found their way into my 401k.

The people need a reliable retirement savings fund that pays more interest than the rate of inflation.

But if there is a way for wall street to steal that money, they will find a way to do so. The money needs to be secure and safe from those greedy wall street bankers.

Either you've worked for the worst companies in the US or you never took the time to read the information concerning your 401k. The company I work for is on their 3rd financial provider (Putnam, Vanguard, and now Fidelity) and from the time I could contribute to a 401k (after 1 year of employment - 1991) I was able to select the funds I wanted. There's one fund that somewhat similar to the one offered in the OP, it's called a stable fund and normally returns 3% to 6% yearly.

I could change funds without paying a fee. I swapped from my high risk funds to the stable fund in 2001 and 2007, I lost less than 10% of my 401k value in either of those years. Then when the stock market began to rise I swapped from the stable funds to high risk funds. I have recovered all my losses and then some.

 

[PrinceofWands]

I think it's largely a waste of time. The reason people don't invest/save now isn't a lack of options, it's a lack of money. 55% of the nation make less than $30k/yr (barely enough to survive). 85% make less than $50k/yr (the point where most people can actually begin significant savings). Costs are skyrocketing, incomes are stagnant or dwindling. That's not a recipe for encouraging savings.

What's more, you're not going to convince a lot of people to put money into things when their future is questionable. Quite frankly a LOT of people aren't certain there's going to be an America by the time they retire, never mind a stable market.

 

[Londo_Jowo]

Diversify, seriously. If your 401k is investing individual stocks you run the risk of massive ups and downs. If they refused to answer questions find a new manager. I'd suggest to you to invest in the vanguard 20xx funds.

Since the company changed over to Fidelity I've have my contribution as 75% to their 2025 fund and 25% to the stable fund.

 

[Genx87]

Lockbox in what way? It just sounds like purchases of treasury bonds.

The article mentioned moving it to a tradition IRA once it grew in size. I expect that means investing in mutual funds.

 

[Texashiker]

Either you've worked for the worst companies in the US

More like companies who did not care about their employees.

The company I am with now, my 401k is doing very well.

 

[Hayabusa Rider]

Lockbox in what way? It just sounds like purchases of treasury bonds.

The devil is in the details. "Sounds like" isn't anywhere near good enough when we're talking DC. That said, if it's secure, in fact not talk, then it has possibilities. I'd say it's worth looking into.

 

[Hayabusa Rider]

I think it's largely a waste of time. The reason people don't invest/save now isn't a lack of options, it's a lack of money. 55% of the nation make less than $30k/yr (barely enough to survive). 85% make less than $50k/yr (the point where most people can actually begin significant savings). Costs are skyrocketing, incomes are stagnant or dwindling. That's not a recipe for encouraging savings.

What's more, you're not going to convince a lot of people to put money into things when their future is questionable. Quite frankly a LOT of people aren't certain there's going to be an America by the time they retire, never mind a stable market.

Improving employment and income and retirement are not mutually exclusive goals. What would you like Obama to say- "I'm sorry. We have some ideas to make retirement a possibility for some, but because not everyone can do so at this time I think you should be out of luck"?

 

[PrinceofWands]

Improving employment and income and retirement are not mutually exclusive goals. What would you like Obama to say- "I'm sorry. We have some ideas to make retirement a possibility for some, but because not everyone can do so at this time I think you should be out of luck"?

He can say anything he wants, he's addressing a non-existent problem. Like I said, there are plenty of savings and investment options. That's not why people aren't doing it.

For the tiny percentage of people that save (never mind invest) they can almost certainly make do quite well with existing options. I'd rather the government focus on ACTUAL issues.