Obama to launch government-backed retirement savings program

[Gingersnap]

Obama to launch government-backed retirement savings program
Reuters
3 hours ago

Vice President Joe Biden and House Speaker John Boehner of Ohio listen as President Barack Obama gives his State of the Union address on Capitol Hill in Washington, Tuesday Jan. 28, 2014. (AP Photo/Charles Dharapak)

WASHINGTON, Jan 29 (Reuters) - 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.

Those accounts would be available to households earning no more than $191,000 a year. Businesses will need to register in the pilot program by the end of the year for their employees to participate voluntarily.

Investors would earn a variable interest rate equal to the Thrift Savings Plan, or TSP, which is available to federal employees. Contributions could be withdrawn tax-free at any time.

Initial investments could be as low as $25, and contributions as small as $5 could be made through payroll deductions.

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.

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

The badness of this idea is astonishing. Seriously, people would be better off putting paper money in envelopes and hiding it behind the sugar in the cupboard.

Yahoo

[Adam]

I'm pretty sure this qualifies as the dumbest idea of all from last night. It was also the only "fresh" anything that came out of an hour's worth of drivel.

It's kind of amazing: even an idea as simple as letting people save for retirement, and somehow Obama managed to screw it up.

[Billy Jingo]

I would ask why it is a bad idea but I already know the answer; it came from the current president.

[Adam]

I would ask why it is a bad idea but I already know the answer; it came from the current president.

No, it's a bad idea because it's ludicrously over-complicated and it's guaranteed to give crappy returns to people who aren't financially-savvy in the name of having the poorest people in the country provide the federal government with a low-interest loan.

[Billy Jingo]

I am going with my original thesis.

Good screed sentence, though.

[Adam]

I am going with my original thesis.

Good screed sentence, though.

Duly-noted: you're cool with the idea of having the poorest and most vulnerable in America pony up for low-interest loans for the federal government. Good show!

[Billy Jingo]

Duly-noted: you're cool with the idea of having the poorest and most vulnerable in America pony up for low-interest loans for the federal government. Good show!

I bought savings bonds when I was in the Army. Wish I still had them .... or the Trans Am I spent them on .... one of the two.

[Adam]

I bought savings bonds when I was in the Army. Wish I still had them .... or the Trans Am I spent them on .... one of the two.

And that's fine. No one said that there is anything wrong with buying savings bonds. Using some newly-formed savings bond as a sole basis for retirement planning is a seriously bad idea, though, as well as creating this Byzantine system around it.

If Obama were actually serious about this, he would propose some manner of transitioning So-So Security to an individual retirement plan that contains a safety net within it. But, that whole myRA thing was just a throw-away anyway. Nothing new there: lots of Presidents put in some "grand idea" into a SOTU that is never going anywhere. I'm still waiting for the sub-orbital passenger plane that will take people from New York to Tokyo in just a couple of hours that Reagan proposed.

[Novaheart]

No, it's a bad idea because it's ludicrously over-complicated and it's guaranteed to give crappy returns to people who aren't financially-savvy in the name of having the poorest people in the country provide the federal government with a low-interest loan.

How much are they saving now? What is their rate of return now?

I noticed that the woman who advertises on Phil Grande is only interested in people who have saved $250K for retirement. We're not talking about her customers. We're talking about people who might save enough to bury themselves or pay for their medications when they get their 2-5 years of social security before croaking.

[Novaheart]

And that's fine. No one said that there is anything wrong with buying savings bonds. Using some newly-formed savings bond as a sole basis for retirement planning is a seriously bad idea, though, as well as creating this Byzantine system around it.

If Obama were actually serious about this, he would propose some manner of transitioning So-So Security to an individual retirement plan that contains a safety net within it. But, that whole myRA thing was just a throw-away anyway. Nothing new there: lots of Presidents put in some "grand idea" into a SOTU that is never going anywhere. I'm still waiting for the sub-orbital passenger plane that will take people from New York to Tokyo in just a couple of hours that Reagan proposed.

I read somewhere that California is actually taxing people and putting the money in individual "accounts". Perhaps I read that wrong.

[Adam]

How much are they saving now?

Obviously that's up to the individual, but the statistics say that the overwhelming majority of the poorest workers are not saving much, if any, other than So-So Security.

What is their rate of return now?

0% on monies not saved. It's actually a negative number for So-So Security.

I noticed that the woman who advertises on Phil Grande is only interested in people who have saved $250K for retirement. We're not talking about her customers. We're talking about people who might save enough to bury themselves or pay for their medications when they get their 2-5 years of social security before croaking.

I have no idea who Phil Grande is. Regardless, I know and understand that the people in question are largely on the bottom end of the economic scale: as the OP notes, there would be a cut-off at $191K for a household. Now, $191K is a pretty comfortable living for pretty much any household, but it's not really "rich," either.

I read somewhere that California is actually taxing people and putting the money in individual "accounts". Perhaps I read that wrong.

Just to be clear: I'm not opposed to finding a way to get people on all parts of the economic spectrum to save, and especially to save early, because the best friend that savings has is time. Indeed, I would frankly prefer some manner of mandatory savings plan that could eventually overtake SSI and ultimately put that Ponzi scheme out of business. What I'm opposed to is a Byzantine federal investment jungle that promises "retirement" for people but limits their returns to the point that they're not getting anywhere by saving that way. Honestly, I would love to have a system that would take out all FICA and replace it with employer-matched contributions that go towards three things: 1.) a retirement savings plan; 2.) a combined long-term disability and old-age health insurance, and; 3) a medical savings account from which one purchases private insurance of one's own choice, with a certain basic set of guidelines. Particularly with starting young (at least once upon a time, most kids had a summer job by the time they were 16), it's very possible to take these amounts and help these people, regardless of their financial savvy, to build a fairly nice nest-egg as well as save and prepare for emergencies that will befall them later in life.

The trick is, what I would want to do can be written down on about ten type-written pages, and that's just entirely too short and simple for legislation to allow a shit-ton of pork and federal influence to be stuffed into it.

[Billy Jingo]

For every complex problem there is an answer that is clear, simple, and wrong.

~ H. L. Mencken

[Gingersnap]

I would ask why it is a bad idea but I already know the answer; it came from the current president.

Jeez, Bok - do ever give that knee-jerk reaction a rest?

This would be a bad idea if George Washington himself rose from the grave to propose it and he was backed up by Abraham Lincoln, Mother Theresa, and Winnie The Pooh.

Think about it:

No investment scheme can guarantee a rate of return or that you won't lose your money. Your Mom can't make that promise. No one can which is why it's illegal to do so in Normal-Person Land.

This is being compared to the Thrift program for Fed workers. Have you seen the fine print on that? The government reserved the right to freeze a participant's investment, to borrow against it, and to change the terms more or less at will.

The government already has a program like this and it's been abused to the point where a lot of participants have no faith at all that they will see a return - we call it Social Security.

The investment body will also be the regulatory body. Beyond that, the value of the dollars is also at the mercy of the regulating body through the machinations of the Federal Reserve. Janus Group may do some kind of obscure stuff but they can't print dollars or set rates.

The investment group has already accrued enormous debt, exhausted its real credit, and teeters constantly on the brink of default - not a good situation.

There are many other reasons to avoid this idea but that's a start.

[Billy Jingo]

Jeez, Bok - do ever give that knee-jerk reaction a rest?

A knee jerk reaction pointing out the predictable, ubiquitous knees jerking?

Do they cancel each other out?

This would be a bad idea if George Washington himself rose from the grave to propose it and he was backed up by Abraham Lincoln, Mother Theresa, and Winnie The Pooh.

I don't believe you.

[Norm dePlume]

Okay, so there is already a program in place that allows employees to have money deducted from their paychecks and put into savings bonds. I don't know when that started, but it was around in the 1970's. And in all of that time, I've never seen anybody complain about it. People that didn't want to do it didn't do it. Nobody ever called it a stupid program. But now Obama has proposed making those payroll deductions for savings bonds tax-deferred, giving them the same tax benefit that a 401K payroll deduction gets.

And what does a good, low tax conservative think about that? No-brainer, right? Of course they hate it. Obama proposed it.