MyRA - Government Backed Retirement Savings Program | TigerDroppings.com
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OnTheBrink
Alabama Fan
TN
Member since Mar 2012
4515 posts

MyRA - Government Backed Retirement Savings Program

Not quite sure how I feel about this yet.

LINK

quote:

The Obama administration is scheduled on Wednesday to launch a retirement savings vehicle called "myRA," aimed at enrolling more Americans in a government-backed investment option.

In details provided by the White House on Wednesday, the retirement savings proposal would be similar to a Roth Individual Retirement Account, but with holdings backed by the U.S. government like savings bonds.

"MyRA guarantees a decent return with no risk of losing what you put in," President Barack Obama said in introducing the program on Tuesday night in his State of the Union Speech


I find this statement hard to believe, but if true, why would an individual want to invest with the government?

quote:

About half of all workers and 75 percent of part-time workers lack access to employer-sponsored retirement plans, the White House said.



makersmark1
Auburn Fan
Member since Oct 2011
2172 posts

re: MyRA - Government Backed Retirement Savings Program
The problem I see is the rate of return will be so low that I'm not sure if it will make a difference.

Even if they use 30 year US Treasuries, the return will be low as it is 3.68% today. So it will take 18 years to double your money. Meanwhile if another person buys a low cost index fund and keeps it 18 years there is a high probability that the index return would be greater than 8 %.

So we want poor people to invest at lower rates of return?


OnTheBrink
Alabama Fan
TN
Member since Mar 2012
4515 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

The problem I see is the rate of return will be so low that I'm not sure if it will make a difference.


I know right. I am sure my definition of a "good rate of return" is different than his.

And a lot of people don't trust the government as is, what would make them want to invest their future with them?


LSUtigerME
LSU Fan
Walker, LA
Member since Oct 2012
996 posts
Online

re: MyRA - Government Backed Retirement Savings Program
quote:

And a lot of people don't trust the government as is, what would make them want to invest their future with them?


I think there's also quite a few who are entirely the opposite. If it's backed and guaranteed by the US government, many people will find that very attractive.

Right/Wrong, some people see it that way.


Iowa Golfer
Iowa Fan
Heaven
Member since Dec 2013
1978 posts

re: MyRA - Government Backed Retirement Savings Program
They need someone to keep purchasing bonds. POTUS is a lot of things, stupid, at least politically stupid, is not one of them.



Janky
LSU Fan
Team Primo
Member since Jun 2011
9978 posts

re: MyRA - Government Backed Retirement Savings Program
That is what I was thinking. A built in purchaser of our junk. Brilliant.


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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
8694 posts

re: MyRA - Government Backed Retirement Savings Program
I agree, to people already with retirement accounts it sounds dumb, but the reality is a large amount of people haven't the slightest clue about saving money. They couldn't tell you what an IRA or 401k is, and probably think the stock market is the devil and a bond is some kind of glue you buy at Lowe's.

These are the people it's meant for, and although I would never give my money to the gov for saving, it's better than them living paycheck to paycheck with zero savings.



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LSURussian
LSU Fan
Member since Feb 2005
85143 posts

re: MyRA - Government Backed Retirement Savings Program
This will be a hard sell to most investors.


igoringa
LSU Fan
Tejas
Member since Jun 2007
10020 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

This will be a hard sell to most investors.


Aimed not at investors but the ignorant. Apparently not know about IRA and such means you 'don't have access' now.

Apparently have to make less than 191K to qualify and once the balance hits 15K, it gets moved to an IRA


OnTheBrink
Alabama Fan
TN
Member since Mar 2012
4515 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

once the balance hits 15K, it gets moved to an IRA


Yeah,
quote:

Participants could save up to $15,000, for a maximum of 30 years, in their accounts before transferring their balances to a private-sector Roth IRA.


Was confusing to me. Is it saying you can contribute up to $15K a year for 30 years, or is it saying that for 30 years you can contribute up to $15K, then you have to transfer it?

To me, if all you can contribute is $15K, it is a glorified money market account. To call something a "retirement" account, then only let investors contribute $15K seems a little absurd.
This post was edited on 1/29 at 9:24 am


igoringa
LSU Fan
Tejas
Member since Jun 2007
10020 posts

re: MyRA - Government Backed Retirement Savings Program
15K total I believe.

Gimmick bullshite


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rmc
LSU Fan
Zachary, LA
Member since Sep 2004
22714 posts
Online

re: MyRA - Government Backed Retirement Savings Program
quote:

They need someone to keep purchasing bonds. POTUS is a lot of things, stupid, at least politically stupid, is not one of them.


Exactly what entered my mind when I first read this. I'm also sure the conspiracy theorists have their own thoughts about what will eventually happen to this money.


diat150
Tulane Fan
OPELOUSAS
Member since Jun 2005
19871 posts
Online

re: MyRA - Government Backed Retirement Savings Program
im all for it if we can put our social security money in this instead of giving it to the government.


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TrueTiger
LSU Fan
Chicken's most valuable
Member since Sep 2004
12522 posts

re: MyRA - Government Backed Retirement Savings Program
Maybe the point is to create a receptacle where all 401k and IRAs can be rolled to one day.

By government mandate?

I can hear it now:

"If you like your retirement plan, you can keep it"


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geauxbears08
LSU Fan
Houston, TX
Member since Jun 2011
62 posts

re: MyRA - Government Backed Retirement Savings Program
I haven't seen very many details about the plan but I'm already trying to figure out how I can use it to cram more money into my Roth IRA each year via some sort of rollover.


jmtigers
Southern Miss Fan
1826.71 miles from USC
Member since Sep 2003
3699 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

I haven't seen very many details about the plan but I'm already trying to figure out how I can use it to cram more money into my Roth IRA each year via some sort of rollover.


This


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Cold Cous Cous
LSU Fan
Obvious and pointed jeering
Member since Oct 2003
13943 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

think there's also quite a few who are entirely the opposite. If it's backed and guaranteed by the US government, many people will find that very attractive.

Right/Wrong, some people see it that way.


I can see how if you spend your time on the Poli Board you assume that everyone mistrusts the gov't. But in real life lots of people fear and mistrust "the stock market," and by comparison see anything issued by the gov't as inherently safe. Which it probably is, the risk of default on these suckers is about as close to zero as you can get.

The fact that it rolls over once you get 15 grand shows me that this is meant as a way to get people's feet wet in investing for retirement. According to the this article I read ten seconds ago, 40% of Americans over 50 have no retirement account at all. This seems like a clever way to target the people who either don't understand investing at all, or see it as scary risky gambling because stocks might go down.


igoringa
LSU Fan
Tejas
Member since Jun 2007
10020 posts

re: MyRA - Government Backed Retirement Savings Program
And these people didn't have 'access' to government savings bonds already?

That is what I don't get. Everyone has access to retirement vehicles, risk free assets etc...


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tigers win2
LSU Fan
Baton Rouge
Member since Oct 2009
2133 posts
Online

re: MyRA - Government Backed Retirement Savings Program
quote:

I haven't seen very many details about the plan but I'm already trying to figure out how I can use it to cram more money into my Roth IRA each year via some sort of rollover.


If your plan allows, you can put after tax contributions into your 401k. The amount can be substantial depending on your plan guidelines and limitations. This amount is above the maximum annual contention limits into a 401k plan. Once you contribute after tax-

401k plans usually allow for "in-service distributions " of after tax dollars. If so, you can roll these dollars to your Roth every year. This means, in addition to maxing out your 401k, you can also put another 15k, 20k or even more dollars into your Roth ever year.

You'd owe tax on any gain that occur before you do the distribution. No income limits either.

Few people know about this process. Even your 401k plan provider service rep will have to likely look it up.


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NC_Tigah
LSU Fan
Member since Sep 2003
56179 posts

re: MyRA - Government Backed Retirement Savings Program
quote:

Even if they use 30 year US Treasuries, the return will be low as it is 3.68% today.



From the PTB
quote:

Image: http://www.aplusb.tv.img.800cdn.com/attached/image/20120815/20120815180197499749.gif

Obama's 'MyRA' retirement plans may have limited advantages
Published: Wednesday, 29 Jan 2014
By: John W. Schoen, CNBC.com Economics Reporter


As part of his pledge to help financially strapped American households, President Barack Obama will sign an executive order creating a new, simpler way to save for retirement. He dubbed it a "MyRA" account.

In his 2014 State of the Union speech, the president announced the plan "that encourages folks to build a nest egg" and "guarantees a decent return with no risk of losing what you put in."

The plans offer households with no retirement savings a place to start. But they come with some serious shortcomings compared to existing individual retirement accounts.
...........

Are these better than IRA and 401(k) accounts?

Not really. Technically, these plans are going to fall under the rules for a Roth IRA, which means you'll pay tax on your contributions before you deposit the money into your MyRA. That means you'll lose the tax advantage of a traditional IRA. The original idea behind those tax rules was to let you shield income from the IRS during your peak earning years and then pay tax when you withdraw the money in retirement, often at a lower rate because your income is lower. You won't get that tax break with a MyRA
..........

One of the main selling points, according to the White House, is that your principal would be preserved: "The account balance would never go down." But that's true for any saver who invests retirement savings into U.S. Treasurys. Like all bonds, you get all your money back if you hold onto it until it matures.

The problem with that strategy is that you'll give up a substantial return. Since the Federal Reserve collapsed interest rates to save the financial system five years ago, the return on a short-term Treasury bonds hasn't even kept up with inflation.

With a MyRa account, your money will be invested in the Government Securities Investment Fund available to federal workers. That fund has an average annual return for the past three years of 2.24 percent. As of December, the average annual inflation rate for consumer prices over the past three years was 2.07 percent.
............

According to the White House, some two-thirds of tax benefits for retirement saving go to the top 20 percent of the income ladder, and one-third goes to the top 5 percent.

Obama wants to limit the tax benefits to those top earners to 28 percent of what they set aside. And he's proposing a cap on tax preferred savings accounts of $3.2 million, which the White House thinks is all anyone needs "to fund a reasonable pension in retirement."

LINK
So Obama's concept of "decent return" is 2.2% in a 2% inflation environment.
Using that yardstick, it is easier to understand why the nimrod thinks our economic recovery is going well, and current U6 UE rates are not worth a mention.


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