the myRA proposal

[kelpdiver 2]

lost in the usual rancor between the parties was the President's proposal to create a new retirement vehicle, apparently without Congressional involvement. Yesterday the administration elaborated on it a bit more.

no fees, no minimums, guaranteed not to lose money, not tied to a job (but would use payroll deductions), and income limits to 191k. Like a roth account, funded by post tax dollars and therefore not taxable on retirement.

But with the details comes the cruel joke
- invests in the Government Securities Investment Fund (basically Treasuries). Returns 1.5% currently, 3.6% over last 10 year period. So while it can't lose money, it is nearly guaranteed to lose money (relative to inflation). Any investment professional recommending this as a retirement vehicle could lose their license.
- 15k account limit, at which point it must be rolled over into an roth ira with a private financial institution.

Begging the question - what's the point? The costs of creating, maintaining, publicizing such a program dwarfs the utility of it. The nicest thing I can say it is lets the Feds take advantage of financial idiots by letting them finance a bit more of our debt.

We already have the roth ira that offers the ability to make the same terribly retirement savings plan, minus payroll deduction. (It's easy to set up monthly EFT from your checking account). It also allows for more choices, no limits.

If Obama's goal was to increase options for people who don't have jobs with 401k programs, simply increase the IRA limits to 17,500 for such people. Or make the combined limit for 401k+ira = 23,000.

I'm embarrassed for the advisers who crafted this turd.

[sfzombie13 324]

it seems to me they could use the effort to actually fix the retirement account that is forced upon all workers now. like maybe putting all the money back into it which was stolen, and making it untouchable in the future by separating it from the government. i mean, it is in place, we use it for everyone, and it should be fairly easy to fix (as opposed to introducing anything new).

_________________________________________
Si hoc legere scis nimium eruditionis habes

[airdvr 210]

sfzombie13

it seems to me they could use the effort to actually fix the retirement account that is forced upon all workers now. like maybe putting all the money back into it which was stolen, and making it untouchable in the future by separating it from the government. i mean, it is in place, we use it for everyone, and it should be fairly easy to fix (as opposed to introducing anything new).

You mean, like a "lockbox"?

Please don't dent the planet.

Destinations by Roxanne

[turtlespeed 226]

kelpdiver

Begging the question - what's the point? The costs of creating, maintaining, publicizing such a program dwarfs the utility of it. The nicest thing I can say it is lets the Feds take advantage of financial idiots by letting them finance a bit more of our debt.

Its the illusion of a good effort, and it was something he could say on tv that appears promising.

I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama
BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun

[Southern_Man 0]

Iago

Most fund companies want at least $500 to open a Roth, but if people can invest $5 a week or $20 a week right off the top of their check I think that's a great thing.

It has been a while since I opened a new one but last time I investigated it seemed a lot of places were willing to open one with a pretty minimal amount if there was an automatic draft in place.

"What if there were no hypothetical questions?"

[kelpdiver 2]

Southern_Man

***
Most fund companies want at least $500 to open a Roth, but if people can invest $5 a week or $20 a week right off the top of their check I think that's a great thing.

It has been a while since I opened a new one but last time I investigated it seemed a lot of places were willing to open one with a pretty minimal amount if there was an automatic draft in place.

Sharebuilder may have been one of the first to drive it to basically zero, but historically, many places would go as low as 500 with a 100/mo autodraft. Now I think you can find something at any starting point.

Vanguard, unfortunately, still starts at 3000, I believe.

[wolfriverjoe 1,523]

NPR had a piece on this during "Morning Edition" this morning.

Long story short, it's intended to be an "Intro To Long Term Saving" vehicle. Low contributions, low max, low risk, low return.

It's intended to get people in the habit of saving. After you do this for a while, then you can move to a traditional or Roth IRA and really save for retirement.

http://www.npr.org/2014/01/30/268686324/obama-calls-for-the-creation-of-myra-accounts

"There are NO situations which do not call for a French Maid outfit." Lucky McSwervy

"~ya don't GET old by being weak & stupid!" - Airtwardo

[futuredivot 0]

But it's myRA meaning it's yours and better-that's what the nice people in Oceana said.

You are only as strong as the prey you devour

[kelpdiver 2]

wolfriverjoe

Long story short, it's intended to be an "Intro To Long Term Saving" vehicle. Low contributions, low max, low risk, low return.

It's intended to get people in the habit of saving. After you do this for a while, then you can move to a traditional or Roth IRA and really save for retirement.

Yes, that's how he presents it. But it's not low risk - it's practically guaranteed to trail inflation. And it offers nothing that isn't already available with the Roth. A large portion of the people this myRA targets are eligible for a tax credit (not deduction, but outright credit) up to $1000/person for contributing to an IRA.

The money that would be spent on the myRA would do much more good for these people in the form of that credit or in better education on the existing options. Or in increasing the IRA limits.

[sfzombie13 324]

no, i mean fix social security. mandatory payments into it already, distribution already there, all we need to do is put back what was stolen from it by the govt and ensure it doesn't happen again. not sure if privatization would work, but maybe. some sort of mostly safe investment to cover inflation possibly.

or possibly lockbox would work. everyone puts in his own deductions and that's what he gets to retire on.

_________________________________________
Si hoc legere scis nimium eruditionis habes

[yoink 321]

turtlespeed

***
Begging the question - what's the point? The costs of creating, maintaining, publicizing such a program dwarfs the utility of it. The nicest thing I can say it is lets the Feds take advantage of financial idiots by letting them finance a bit more of our debt.

Its the illusion of a good effort, and it was something he could say on tv that appears promising.

I kept thinking he was talking about the IRA... pension plans for terrorists.

[weekender 0]

kelpdiver

***
Long story short, it's intended to be an "Intro To Long Term Saving" vehicle. Low contributions, low max, low risk, low return.

It's intended to get people in the habit of saving. After you do this for a while, then you can move to a traditional or Roth IRA and really save for retirement.

Yes, that's how he presents it. But it's not low risk - it's practically guaranteed to trail inflation. And it offers nothing that isn't already available with the Roth. A large portion of the people this myRA targets are eligible for a tax credit (not deduction, but outright credit) up to $1000/person for contributing to an IRA.

The money that would be spent on the myRA would do much more good for these people in the form of that credit or in better education on the existing options. Or in increasing the IRA limits.

i think your too sophisticated to understand the point. there is a huge amount of the population that saves zero. many cannot but many can but dont. i assume they are trying to get those who can but dont to start. if you save a small amount, as opposed to spend it, its better to lose some to inflation than all to your own consumption. thats my guess what its about. get people to start saving. once they realize they can do it they will graduate to better investment options.

you know too much on the subject and im guessing forget that most do not. your saddled with the burden of knowledge, hah.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[Remster 30]

That's my take on it too.

There is absolutely a very large segment of the population that does not save at all. I think this is aimed at them. And while the bonds are very low interest, it's still very close to inflation rates, so I'm not entirely sure it would be a loosing proposition (not a high return one for sure tho).

Remster

[champu 1]

sfzombie13

no, i mean fix social security. mandatory payments into it already, distribution already there, all we need-

-is a time machine to go back and stop that program before it started. Just because it is crashing and burning on a geologic time scale compared to political attention spans does not mean it is not crashing and burning.

I'm just glad this myRA thing is optional so I can completely ignore it.

[wolfriverjoe 1,523]

kelpdiver

***
Long story short, it's intended to be an "Intro To Long Term Saving" vehicle. Low contributions, low max, low risk, low return.

It's intended to get people in the habit of saving. After you do this for a while, then you can move to a traditional or Roth IRA and really save for retirement.

Yes, that's how he presents it. But it's not low risk - it's practically guaranteed to trail inflation. And it offers nothing that isn't already available with the Roth. A large portion of the people this myRA targets are eligible for a tax credit (not deduction, but outright credit) up to $1000/person for contributing to an IRA.

The money that would be spent on the myRA would do much more good for these people in the form of that credit or in better education on the existing options. Or in increasing the IRA limits.

Well, that would be "low return," not "low risk." The idea that the T-Bonds would never be at risk of loss of principal is the "risk" part. I agree that the returns are likely to be low enough to be negative, due to the interest being less than inflation.

But these aren't intended to be "real" investment vehicles. Like weekender said in post #13, it's an "intro" to long term saving.

"There are NO situations which do not call for a French Maid outfit." Lucky McSwervy

"~ya don't GET old by being weak & stupid!" - Airtwardo

[kelpdiver 2]

weekender

i think your too sophisticated to understand the point. there is a huge amount of the population that saves zero. many cannot but many can but dont. i assume they are trying to get those who can but dont to start. if you save a small amount, as opposed to spend it, its better to lose some to inflation than all to your own consumption. thats my guess what its about. get people to start saving. once they realize they can do it they will graduate to better investment options.

But I'm sure you've seen the studies that show that these people you speak of - the more choices you give them, the harder it is for them to take any action. Whereas a 401k with 20+ choices should be a good plan, people collectively participate more with fewer options. (which would suck for me).

So telling these people - ignore all that other shit, all you need is this myRA and you'll be fine - could get some adoption. Unfortunately, it might also cost them 5 years of meaningful investing.

As I've said, why not put the effort into promoting a branded Roth Ira instead? Spend that overhead encouraging Schwab and TD and Fidelity to offer a low minimums IRA with a very short set of investment choices (biased towards principle protection if that really is necessary). And publicize the tax saver credit that already exists.

[weekender 0]

all good points. i gave you my best guess. why does the gov't do alot of what they do? i think politics trumps public good most of the time nowadays.

I think you are over thinking it. again, because you know a lot on the subject. the pol's do not carry that burden.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[kelpdiver 2]

weekender

why does the gov't do alot of what they do?

the mildly cynical part of me thinks he just wants a retirement plan to call his own, particularly if the GOP manages to gut the ACA.

the tin foil hat side thinks that this is a first step towards vague proposals in the past where we're shifted from our private 401k/iras to contributing to a federal pension system. Like SS, great for lower earners who have ignored retirement, but at a cost to the high earners.

the practical side of me sees it is meaningless window dressing - looking like he's attacking the problem without delivering anything. Raising the IRA limits would actually solve the problem of access, but it also would cost in future revenue, whereas a plan that no one will ever use, or if they do, holds government debt, is revenue neutral.

[weekender 0]

kelpdiver

***why does the gov't do alot of what they do?

the mildly cynical part of me thinks he just wants a retirement plan to call his own, particularly if the GOP manages to gut the ACA.

the tin foil hat side thinks that this is a first step towards vague proposals in the past where we're shifted from our private 401k/iras to contributing to a federal pension system. Like SS, great for lower earners who have ignored retirement, but at a cost to the high earners.

the practical side of me sees it is meaningless window dressing - looking like he's attacking the problem without delivering anything. Raising the IRA limits would actually solve the problem of access, but it also would cost in future revenue, whereas a plan that no one will ever use, or if they do, holds government debt, is revenue neutral.

so funny, i thought it was me. i was wondering if they were trying to Trojan horse us into some crappy federal system. then i thought i was being paranoid. BUT THEN i remembered the Heller quote, "“Just because you're paranoid doesn't mean they aren't after you."

whenever i have mixed feelings like this i always just default to the fact i am in fact a super genius. the gov't is def out to get us.

1600, mkt is closed. everyone have a nice weekend. i will not be responding till Monday.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[richravizza 28]

The "Cruel Joke" of HIS, MyRA Plan, Yaa there are Many..
First is, You get to invest in His debt.Then, you get His Guaranttee not to Loose Money.Sounds like a Great Plan?
So you'll get Between What 1.5 to3.6% so
@ 1.5% you'll double your investment in 48 Yrs..Yaa thats a Deal?
Even @3.6%it will take 20Yrs.
By all the Gov't Bonds You Like, You'll only be Poorer For it.

[yoink 321]

richravizza

The "Cruel Joke" of HIS, MyRA Plan, Yaa there are Many..
First is, You get to invest in His debt.Then, you get His Guaranttee not to Loose Money.Sounds like a Great Plan?
So you'll get Between What 1.5 to3.6% so
@ 1.5% you'll double your investment in 48 Yrs..Yaa thats a Deal?
Even @3.6%it will take 20Yrs.
By all the Gov't Bonds You Like, You'll only be Poorer For it.

Compared to investing wisely.


compared to not investing at all? Doesn't sound so bad....

[Airgump 1]

too bad the prez wouldn't work it like chris at Bonehead does with his bonehead bucks. talk about a good return on initial investment!

[richravizza 28]

The US stock market has averaged 9% for 80+ years.At that rate you Blindly double your Investments every 8 yrs.
so,in MYRA $10,000 doulbles in 48 yrs. I'll be 96yrs old or dead.and have $20,000 in bonds that will be worth appox.$ $2,500 in todays dollars at Best.
$10.000 in a Basic index Fund, or Mutual Fund at the average will double every 8 yrs. so in the same 48 yr period your $10,000 is Worth $2,560,000.
$20,000 or $2,560,000 the choice is yours.
But, what would we Expect for an Economic Moron of a President.
YOU KNOW the community organgrinder,that said
"YOU DIDN'T BUILD THIS"
If you save the Way he wants you to, we will all be dependent,as it Should Be.
RISK FREE Gov't Bond?
Like I said, Buy all the Gov't Bonds You want it will only make you POORER for IT.