Obama's "myRA" Proposal - Your Thoughts?

[Fern]

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.

Of course they will.

Who the heck else will administer the plan?

Fern

 

[Mursilis]

I am 46 years old and have just now reached a point in my life where my wife I can set aside extra money for retirement.

With kids, child support (that is 20% of my income right there), house note, car note,,,, how are people supposed to save money?

Maybe not have a car note, and not such a large house note?!? My daily driver is a '97 Toyota pick-up. Sure, it's a beater, but it's paid for, it still runs great, and taxes and insurance on it are cheap because it's so old. I also bought a modest house with a 30 year fixed mortgage which amounts to less than 25% of my monthly gross. Meanwhile, I've got family and friends whining about not being able to save while they're tooling around in brand new SUVs, living in McMansions, spending $$$ on toys like motorcycles and sports cars, and one even put in an in-ground pool. These same people think nothing of eating out weekly and dropping $$ on "necessities" like NFL season tickets, etc. I've known very, very few people who truly didn't have enough extra income to save anything.

 

[BUnit1701]

Pray tell, what's a safe investment these days. Mattresses are starting to look inviting.

I know traditinally I should be moving to bonds at this stage of my life, but they keep saying bonds aren't safe.

I'm damn glad I never paid any attention to the gold bugs.

Never? I would think like 2004, 2005 would have been pretty good times to jump on board.

 

[Lithium381]

That's all pretty good advice except for the financial advisor line. It should just read "Financial advisers - don't bother".

pretty generic but solid advice. . . . financial advisers make sense for some people. . . . .

 

[Fern]

-snip-
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.

Uh, I'd be careful there.

If the money goes into fixed notes or bonds, yeah, you could lose money if the interest rate goes up sufficiently. I'm reading people can cash out of their MyRA and transfer the balance to a regular IRA so the possibility exists to liquidate the US note/bond portfolio.

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.

Yep.

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.

At this point I don't see any 'here' here.

We've already got similar plans:

http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Payroll-Deduction-IRA

We've had others, but for various reasons Congress has either rescinded them or burdened them with participation requirements which reduced their appeal. E.g., Salary Reduction Simplified Employee Pension Plan (SARSEP)

We've got already got of pile of various retirement plans, why not just pick one and modify it ?

List of plans types: http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1

Fern

 

[Lithium381]

I'm able to max out my IRA, my wifes' IRA and put about 100/mo into a 529 for our daughter. . . . it's a good start but it won't sustain us in retirement.. assuming the stock market doesn't crash again

 

[Fern]

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.
-snip-

True.

BTW: The info I'm looking says Fidelity offers people the chance to start an IRA and there is NO minimum investment limit. I.e., Obama's proposal seems unnecessary. Seems the big reason for his plan is no minimums. Ha, they already exist. I would imagine other firms also offer IRA will no minimum requirement. (MyRA seems pointless, again we already have several similar type salary reduction plans in existence.)

Fern

 

[Fern]

Probably not. There is only one investment vehcile. A government fund modeled after the federal TSP. I believe it will be fee free just like TSP.

Nope, somebody has to manage it, has to generate and mail statements (or put them up on the web) etc.

Nothing is free.

Fern

 

[MomentsofSanity]

True.

BTW: The info I'm looking says Fidelity offers people the chance to start an IRA and there is NO minimum investment limit. I.e., Obama's proposal seems unnecessary. Seems the big reason for his plan is no minimums. Ha, they already exist. I would imagine other firms also offer IRA will no minimum requirement. (MyRA seems pointless, again we already have several similar type salary reduction plans in existence.)

Fern

Seemed to me the primary intent was to establish a retirement saving plan for capital preservation while attempting to maintain a modest rate of return. Limit what investment options are available within the plan and remove the normal risks you typically find with self directed retirement accounts.

 

[Fern]

Seems like as good a time as any to repost this picture:

Everything the average joe needs to know about money can fit on a 3x5 index card:

Yep (but 20% savings isn't going to happen for most people. It's just too much. In fact it's almost as much as that recommended for a home purchase. But a great goal still.)

Fern

 

[MomentsofSanity]

Nope, somebody has to manage it, has to generate and mail statements (or put them up on the web) etc.

Nothing is free.

Fern

You can maintain IRAs at just about all discount brokerages without fees outside regular trade commissions. Typically paper statements and trade confirmations are the only fees associated with those account types should someone opt not to have electronic delivery.

Brokerages will happily maintain them in the hopes of having access to other business for those same individuals.

 

[Fern]

That's my angle on it. I'm sure the 401k and IRA legislation turned out to be a massive windfall of casino money to create more opaque financial instruments for Wall Street to squander away from us fools.

This wiil be round 2 to get the last sweepings off the floor.

I've got a degree in Finance as well as Accounting. I considered working in the investment/stock market field upon graduation, but that was before 401(k) and IRA existed. Before those the investment/stock market field was just a 'boutique business'. Seats on the NYSE could be purchased for just $100K. Now they're worth 100's of millions $'s

401(k)s etc turned the stock market into the huge retail business it is today.

Fern

 

[Fern]

Seemed to me the primary intent was to establish a retirement saving plan for capital preservation while attempting to maintain a modest rate of return. Limit what investment options are available within the plan and remove the normal risks you typically find with self directed retirement accounts.

I didn't see any limit on investment options, just that the default was Treasuries.

Fern

 

[MomentsofSanity]

I didn't see any limit on investment options, just that the default was Treasuries.

Fern

White House released a fact sheet yesterday. The section on "safe and secure" leads me to believe the vehicles would be limited to government backed securities.

http://www.whitehouse.gov/the-press...l-securing-dignified-retirement-all-americans

Seems it will be government backed and only up to a maximum of 15K, at which point it would need to be rolled into a regular Roth IRA.

 

[Fern]

You can maintain IRAs at just about all discount brokerages without fees outside regular trade commissions. Typically paper statements and trade confirmations are the only fees associated with those account types should someone opt not to have electronic delivery.

Brokerages will happily maintain them in the hopes of having access to other business for those same individuals.

Still, it ain't free. One way or another you're going to pay. See bolded above.

I took the poster I was responding to to actually mean "free" as in free. Even if the govt managed the MyRA it isn't going to be free. Somebody's going to pay for all those employees etc.

Otherwise, some are complaining about Wall Street making money off the MyRA accounts - well, that's a certainty.

Fern

 

[Hugo Drax]

Word is Madoff like returns.

 

[Fern]

White House released a fact sheet yesterday. The section on "safe and secure" leads me to believe the vehicles would be limited to government backed securities.

http://www.whitehouse.gov/the-press...l-securing-dignified-retirement-all-americans

Seems it will be government backed and only up to a maximum of 15K, at which point it would need to be rolled into a regular Roth IRA.

OK, I hadn't seen that before. What I saw was more vague. Sounds like they've now decided to limit it to treasury securities:

Safe and Secure: Principal Protection So Savers’ Account Balance Will Never Go Down. The product will be offered via a familiar Roth IRA account, and savers will benefit from principal protection, so the account balance will never go down in value. The security in the account, like all savings bonds, will be backed by the U.S. government. Contributions can be withdrawn tax free at any time.

But see the underlined portion. So yeah, your "account balance" won't go down but I still contend that if you're investing in treasury notes or bonds and the interest rate goes up sufficiently when you 'cash out' to transfer funds into a regular IRA you're going to lose principal. It's unavoidable. The only way to avoid risk of losing principal in any (debt) security like treasuries is to hold to maturity. But that's only the illusion of no loss.

Edit: Correction, I suppose they could put the funds into some kind of inflation or interest adjusted treasuries. I seem to recall those were either proposed or actually available now.

Fern

 

[MomentsofSanity]

OK, I hadn't seen that before. What I saw was more vague. Sounds like they've now decided to limit it to treasury securities:



But see the underlined portion. So yeah, your "account balance" won't go down but I still contend that if you're investing in treasury notes or bonds and the interest rate goes up sufficiently when you 'cash out' to transfer funds into a regular IRA you're going to lose principal. It's unavoidable. The only way to avoid risk of losing principal in any (debt) security like treasuries is to hold to maturity. But that's only the illusion of no loss.

Edit: Correction, I suppose they could put the funds into some kind of inflation or interest adjusted treasuries. I seem to recall those were either proposed or actually available now.

Fern

From what I've been forwarded thus far it is believed it will mirror TSPs as far as the treasuries available for investment.

 

[Fern]

From what I've been forwarded thus far it is believed it will mirror TSPs as far as the treasuries available for investment.

OK, thanks. I'm guessing that means the "G Fund" so there would be no risk principal loss from I can see.

Edit: It' still not entirely clear to me how this would work. If G funds hold non-marketable treasuries I don't quite see how the details work. E.g., if they're not marketable I don't readily see how an investment firm like Schwab can hold/manage the accounts. If investment firms can't manage the accounts that would seem to leave it to a govt agency. I guess I need to read more about these propose MyRA accounts.

Fern

 

[Hugo Drax]

I heard that the investment will be a risk free split strike strategy based o a basket of stocks. 10 percent a year every year.

 

[MomentsofSanity]

Obama announced his plan to create by executive order a program called myRA, which would enable workers in households earning less than $191,000 annually to enroll in an Individual Retirement Account, or IRA. The plan will give private-sector workers the “same security investment return available to federal employees,” according to the White House, by earning the same variable interest rate as the TSP’s G Fund.

“It’s the same structure as the G Fund in the Thrift Savings Plan, so it’s the average of yields that are above four years,” said Treasury Secretary Jack Lew Wednesday. “And it’s something that we’re very familiar with because most federal employees have a [TSP] and it’s really the same mechanism.”

http://m.govexec.com/pay-benefits/2...dropdown&oref=ge-iphone-interstitial-continue

 

[Mai72]

What is going to happen is the people who saved diligently are going to get taxed to high heaven. You guys are going to have to pay for and support the people who don't have a retirement fund. Social security isn't going to be enough. I can most definitely see government intervention and it's not going to be pretty.

 

[Zorkorist]

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

First, we tax people.
Then we tell people they can avoid taxes by;

A) Killing their boyfriend or girlfriend
B) Climbing Mount Everest
C) Eating Crackers while Whistling
D) Sucking it up. Just suck it up.

-John

 

[Zorkorist]

What is going to happen is the people who saved diligently are going to get taxed to high heaven. You guys are going to have to pay for and support the people who don't have a retirement fund. Social security isn't going to be enough. I can most definitely see government intervention and it's not going to be pretty.

The children are the one to suffer. There will be no America, land of the free, as we know it.

Debt Monsters.

-John

 

[NoStateofMind]

Remember you are playing with other people's money here.

The idea is actually contained in a broader retirement proposal that Obama has been asking Congress to take up for years in his annual budget request. Obama wants all workers to be automatically enrolled in IRAs unless they specifically opt out. Under one scenario, monthly paycheck deductions would be invested in bonds unless workers choose another option.

With his track record we know damned well there will be no "opt out". Social security was supposed to be for retirement but the dirty politicians couldn't keep their hands to themselves and this is just another way to prolong their money grubbing. How about you keep your dirty hands off of my labor? Fucking roaches.

Anyone who does not see this coming is lying to themselves.