So, what do we think of Obama’s proposal for “myRA” retirement accounts?

posted at 6:41 pm on January 29, 2014 by Allahpundit

Lay aside your understandable assumption on economic matters that if O’s for it, it’s probably a bad idea. Is this, objectively, a bad idea? CNN Money and, especially, CNBC have nifty primers on the myRA ground rules. It’s an IRA aimed at the lower class, promising them a guaranteed return to entice them into parting with scarce funds they might not otherwise be willing to invest. The minimum initial investment is just 25 bucks and the choice of investments is limited to U.S. government securities so that there’s no risk of loss. (Well, sort of. More on that in a sec.) Essentially, it’s like having a Roth IRA consisting of nothing but savings bonds. If/when the account hits $15,000, it rolls over into a plain ol’ Roth IRA and you’re free to invest in the broader market from there. And although these will be offered through one’s job, it’ll cost an employer nothing to do so. The feds will handle the expense of administering the accounts in order to encourage businesses to make them available to workers. The grand idea, I believe, is simply to encourage saving for retirement even among the poor and working class, especially blacks and Latinos:

More often than not, blacks and Latinos benefit little from the tax breaks and other policy initiatives aimed at bolstering retirement security because they typically have no money to save for retirement in IRAs and other vehicles outside the workplace, according to Diane Oakley, executive director of the National Institute on Retirement Security (NIRS), which conducted the study. In addition, they are much less likely than whites to have defined-benefit pensions, particularly outside of public sector jobs.

“Those are startling findings,” Oakley said. “The typical household of color has nothing saved in a retirement account.”…

The NIRS report said that among households headed by blacks and hispanics between the ages of 55 and 64, the average retirement savings account balance was $30,000. Among whites on the verge of retirement, it was $120,000. Meanwhile, investment and human resource firms typically recommend that retirees have assets worth anywhere from eighth to 11 times their annual wages in order to adequately prepare for old age.

A key point made in that same WaPo report: As states scale back pensions and the feds start to cope with the inevitable entitlements crisis, encouraging people to save who otherwise might not makes fiscal sense. Plus, if it catches on as a “starter IRA,” it should — and actually will, per the $15,000 cap — lead eventually to broader public interest in private markets. After all, as the CNBC piece linked above points out, O’s assurance that the principal is “guaranteed” doesn’t mean that the purchasing power of your hard-earned dollar is:

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.

As some myRA holders come to realize that, they’ll look to transition relatively quickly to private investments and a regular IRA. The myRA should, in theory, simply be their entrance to the stock market. It’s a baby step, but better that than proposing a new entitlement.

Two questions, though. One: How many people will this attract, realistically? Just 24 percent of the public is confident in the stock market as place to save for retirement, according to one recent survey. That’s part of the appeal of the myRA, especially to groups that are more pro-government on balance in the first place — if another financial crisis hits, your money’s still safe — but Treasury rates are so low that it’s anyone’s guess how much encouragement a two-percent return will provide to people who are living paycheck to paycheck. Two: Related to the last point, if the goal here is to help the poor, why treat the myRA as a Roth IRA? Why not make it tax-free on both ends, like a traditional IRA when the money’s deposited and a Roth when it’s finally withdrawn in retirement? If you’re worried about too many middle-class and upper-class people using that as a tax shelter, you could impose an income cap for tax-free treatment. The lost tax revenue would likely be chump change relatively to the size of federal spending.

Update: A good point from Heritage: The myRA isn’t limited by regulation to lower-income workers. On the contrary, the income cap for a household to qualify is $191,000. Even upper-middle-class people can open one if they like. But … why would they? It’s inferior to a regular Roth IRA in every way. If you’re too risk-averse to invest in private companies, you can just use your Roth to buy a basket of government securities. The point of the myRA, I think, is simply to catch the attention of people who otherwise wouldn’t think twice about saving for retirement. The higher you go up the income ladder, the fewer of those people there are likely to be.


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When the FED pulls the rug out from under the Stock market it will crash and then Obama will ride to the rescue and offer to make them whole with MYRA bonds. It’s a ruse to steal nearly every retirement account in the country.

DFCtomm on January 29, 2014 at 7:11 PM

Bingo, bango, bongo. This is just the setup to take all retirement accounts, you know, to keep them safe from the “evil banks” to pay off debt, that they in gov along with the banks have caused themselves.

oryguncon on January 30, 2014 at 12:05 AM

What do you do when the Chinese stop buying worthless US bonds and you’re facing potential default? Find a new market and tell every US citizen to buy your bonds instead. And when they don’t, use the commerce clause to require everyone to buy them. And when they come due? QE Elderly: Pay off the bonds with dollars you just printed just for that purpose. It’s a win/win. It’s a party.

A National Socialist Retirement party.

flicker on January 30, 2014 at 12:10 AM

working poor.

A.S.R. on January 29, 2014 at 10:30 PM

What the hell is ‘working poor’? That anything like ‘African American’?

Lanceman on January 29, 2014 at 11:23 PM

Working poor are anyone who has little to set aside from their jobs, especially those just starting out or who have had little time and funds to accumulate.

Wealth, after all, for most is unspent funds accumulated over time.

A.S.R. on January 30, 2014 at 1:14 AM

I can’t see how, in practice, this is anything but a way for the government to have more money to spend. Just as the Social Security “Trust Fund” has money waiting for our retirements. Ha! It’s really just another source of money for the government. Plus, of course, the administration of the accounts would be more federal government bureaucracy.

Oh, and how is that something authorized under the Constitution?

Heck why not make all individual savings account (held in a person’s name) be tax-free up to a $15,000 balance?

–snip–

Russ808 on January 29, 2014 at 10:57 PM

This would make sense, and be cheaper to the treasury. (Unless the real purpose of myRA really IS to take the money and run.)

Kevin K. on January 30, 2014 at 1:55 AM

It’s an idiotic idea unless the current tax code is scrapped, and we go flat-tax

TX-96 on January 30, 2014 at 6:34 AM

Here are the words that tell you it is a scam: guaranteed returns.

We already have this: it is called Social Security.

It is a scam.

Also see – retirement and pensions that have a ‘guaranteed return’.

What you want are self-managed funds with guaranteed contributions, but that is left up to the individual without the ‘help’ of the government. Note that ‘help’ from government has a cost and price to it, and those are the loss of personal control over your funds. When you invite the government into how you save, you can expect government to see your ‘savings’ as its very own.

ajacksonian on January 30, 2014 at 7:12 AM

I thought the reason we needed all the public assistance type programs was because people were too poor to meet their basic needs – food, shelter, cell phone, etc. Even the working poor needed help due to reduced hours.

If you’re so poor you need a freebie Obamaphone how would you be able to “put money aside?”

katiejane on January 30, 2014 at 8:08 AM

Here we go again with the govt taking over what the private sector already does, managing and investing people’s savings. If they had just gone after the low income workers, it would have been the first bite in a very big apple, but they needed more of our money and set the income limit at $191T. That’s not helping the poor to save, that’s taking over all our money and making us more and more beholden to their whims. The next step could be to change the Roth rules to force people into the myra. Do you ever get the feeling that the govt treats people like the stainless steel ball in a pinball machine? People should save on their own if they want to or are capable. My great uncle who lived through the depression told me a very long time ago to save something each week even if it was just 50 cents or a dollar. The govt needs to get out out of the car, health insurance and now saving for retirement business.

Kissmygrits on January 30, 2014 at 8:19 AM

don’t worry, if you like your IRA, you can keep your IRA…

Keith_Indy on January 30, 2014 at 8:46 AM

All of these discussions of the pros and cons of this plan are, though interesting, missing the mark, IMHO.

Where in the United States Constitution is the federal government delegated an enumerated power that either permits or requires it to help the citizens of the country prepare for retirement? Where do they have the authority or responsibility to set up retirement savings accounts of any kind?

Whether or not these “MyRA” savings plans are beneficial or not, whether they will work or not, is irrelevant. They are unconstitutional. And therefore should be rejected out of hand.

Shump on January 30, 2014 at 8:56 AM

It’s just the camel’s nose – the first baby step towards getting people groomed for the fleecing of their existing retirement accounts.

Just another hint at the federal government’s ‘single payer’ plan for our retirements, so to speak. What you have now will be destroyed/confiscated, to be replaced with something ‘they’ say is good enough for you – you know, in the name of making it fair for everyone or something.

Since the country is effectively and continually rolling over and sticking it’s collective rear end into the air to yawningly accept reaming after reaming from DC, we’ve demonstrated that they can do whatever they want to us, and we simply won’t do a damn thing about it.

Midas on January 30, 2014 at 9:07 AM

All of these discussions of the pros and cons of this plan are, though interesting, missing the mark, IMHO.

Where in the United States Constitution is the federal government delegated an enumerated power that either permits or requires it to help the citizens of the country prepare for retirement? Where do they have the authority or responsibility to set up retirement savings accounts of any kind?

Whether or not these “MyRA” savings plans are beneficial or not, whether they will work or not, is irrelevant. They are unconstitutional. And therefore should be rejected out of hand.

Shump on January 30, 2014 at 8:56 AM

And unfortunately, of late, the Constitution and $5 will buy you a cup of coffee.

Whether something is unconstitutional or not no longer matters. Discussions on the merits of the constitutionality of government actions “are, though interesting, missing the mark”.

Midas on January 30, 2014 at 9:11 AM

It’s the first step toward redistribution of peoples’ retirement funds.

Of all the garbage that spewed from his mouth, this was the foulest.

It’s time.

justltl on January 30, 2014 at 9:30 AM

I think like most people in here, I call BS. There already is Social Security. There already are bonds (you know that the gov’t no longer issues paper bonds to people right? The gov’t holds it). They’ve been toying with ways to get a hold of everybody’s retirement accounts for a while and what government program doesn’t creep? Besides all that, everybody knows what they’ll do with the money…find a slick way to put the money into the general fund and piss it away, like they do with social security money.

John_G on January 30, 2014 at 9:35 AM

What do you want to bet that in a few years it will become “OurRA”

flyoverland on January 30, 2014 at 10:00 AM

Whether or not these “MyRA” savings plans are beneficial or not, whether they will work or not, is irrelevant. They are unconstitutional. And therefore should be rejected out of hand.

Shump on January 30, 2014 at 8:56 AM

Welp! Since single payer additional Social Security isn’t a politically popular idea, we can’t wait to roll out this unconstitutional scheme called Obamacare MyRA.

blammm on January 30, 2014 at 10:08 AM

What do you want to bet that in a few years it will become “OurRA”

flyoverland on January 30, 2014 at 10:00 AM

Uncle Sugar will sprinkle a little in everyone’s MyRA account in the fall of even numbered years. Because… fairness and stuff, you know.

blammm on January 30, 2014 at 10:10 AM

Dress it up with all sorts of pretty fluff, throw some fear in about market instability and old age, blend well, and what you have is a nasty tasting money grab brew. This is nothing more than a massive money grab, because the Federal Government doesn’t have enough money to keep spending like it wants to. US debt is becoming worth less and less, we’ve actually monetized our debt and now the US Government is the biggest purchaser of our own debt. The Treasury Dept issues debt, the Federal Reserve prints money and “loans” it to Wall St, and Wall St then buys the debt in the largest money laundering scheme in history.

But that game is faltering, nobody wants to buy our lousy debt and they need new cash, and there is some $19-20 TRILLION in private savings they want to get their hands on. If they can get all the rubes and fools and fearful and ignorant to buy into the idea of a guaranteed no risk good return “investment” then they can Ponzi scheme the formerly private IRAs and 401Ks, spend all that money on their Cronies and pet allies while pretending to pay off the debt, and hope you die before you’re old enough to get some of your money back from T-Bill annuities and pay-outs.

Thus the myRA is born and spun to us, regardless of what it purports to do, it is little more than the repackaged child of the “GRA” or “Guaranteed Retirement Account” which was gaining ground in Congress and the Federal Government until the 2010 Tea Party election changed the balance of power in the House. And the GRA itself was just a more cunning version of Argentina’s pension grab in 2008. Argentina did this in 2008 when their government ran out of money. So they created a government retirement account and “rolled” all private savings into (forcibly). It only deepened their economic crisis. Here, it would body blow our economy and destroy the very concept of private savings.

EasyEight on January 30, 2014 at 10:15 AM

Here’s a better proposal:

Allow workers, IF THEY CHOOSE, to divert half their SSDI tax (1/2 from paycheck, half from employer) into a privately managed equity account. Place reasonable restrictions on the allocation of funds based on age. For example, a 30 YO could allocate up to 70-80% toward growth-oriented equities, a 50 YO mabye 50%, and at sixty you’d have go go 70% bond & income, etc.

You want the poor to become wealthy? This is how you do it, not by investing $25/pop into Government bonds.

SAMinVA on January 30, 2014 at 10:23 AM

Here’s how this will work. First setup government IRAs, then eliminate the pre-tax nature of private sector IRAs and 401Ks to force people into the government plan. Also, make it difficult to cash out your private IRAs and 401Ks by jacking up the early withdrawal penalties — but give you a “no load roll-over” into your ObamaIRA. Then “poof”, once everybody is in – nationalize the government plan, seize the balances, and replace it with the promise of a government pension, or a “guaranteed annuity” as the said with the GRA scheme.

EasyEight on January 30, 2014 at 10:37 AM

Besides all that, everybody knows what they’ll do with the money…find a slick way to put the money into the general fund and piss it away, like they do with social security money.

Since you are buying a government bonds, I believe that by default the money is going into the general fund just like in social security.

JohnnyL on January 30, 2014 at 10:39 AM

This basically sounds like a retirement plan for the same sort of people that deliberately set themselves up with big tax refunds. In terms of time value of money considerations, it’s not a good investment, as people with this account would be lucky if their T-bill returns would keep up with inflation.

That being said, I’m not going to call this a bad idea. Way too many people make no attempt at all to save, and if this can get any significant number to get in the habit, wonderful.

That being said,

Allow workers, IF THEY CHOOSE, to divert half their SSDI tax (1/2 from paycheck, half from employer) into a privately managed equity account.
SAMinVA on January 30, 2014 at 10:23 AM

This is a much better idea, and it’s the only real long term solution for Social Security. Unfortunately it won’t be happening any time soon, with Democrats screaming about how we’d be “gambling” with taxpayer money. Yes, the markets go up and down (my IRA’s shed close to 10% this month), but over the long haul its extremely predictable.

LukeinNE on January 30, 2014 at 10:52 AM

Does this mean that wall street will not longer be labeled
EVIL by the democrats?

2.25% rate of return?
you can get 5% investing in common stock of PPL or a lot of other utilities, and they only have minimum monthly investment requirements of 50 bucks.

To me a utility stock is 1000 times more open with its financial books than the fed reserve.

yes i invest in the stock market, i tend towards utilities,
old school plan
diversified in D.R.I.P stocks
with automatic monthly invesments
and the years of 2007 to 2009 i got lots CHEAP

sniffles1999 on January 30, 2014 at 10:53 AM

Yep, I’ve been waiting years for the government to make its first move toward seizing retirement accounts. I chose well.

HiJack on January 30, 2014 at 11:10 AM

Agree with above comment that Obama or future presidents would feel obliged to ‘rescue’ funds in a crisis.

Also, it would only be a matter of time before this was made a ‘mandatory’ program for all of us.

Rightyismighty on January 30, 2014 at 11:11 AM

PFFTT!!

That’s what I think of it.

RebeccaH on January 30, 2014 at 11:12 AM

Here’s a better proposal:

Allow workers, IF THEY CHOOSE, to divert half their SSDI tax (1/2 from paycheck, half from employer) into a privately managed equity account. Place reasonable restrictions on the allocation of funds based on age. For example, a 30 YO could allocate up to 70-80% toward growth-oriented equities, a 50 YO mabye 50%, and at sixty you’d have go go 70% bond & income, etc.

You want the poor to become wealthy? This is how you do it, not by investing $25/pop into Government bonds.

SAMinVA on January 30, 2014 at 10:23 AM

But then you’re diverting money away from paying retirees on Social Security just when the boomers are starting to retire.

HiJack on January 30, 2014 at 11:15 AM

Banks have provided guaranteed savings accounts since the FDIC reforms of the 1930′s. A carefull review of this new Obama government program exposes this proposal as a useless overlap.

Clearly, this ‘grand idea’ was designed by someone who never went into a bank and talked to a teller about what products they provide.

Never underestimate the economic illiteracy of Obama.

Freddy on January 30, 2014 at 12:36 PM

Did u hear that OBOZO proposed a new “myRA”? It comes with the gov’t promise:”If u like ur retirement savings, u can…”

The “myRA” will have an INDIVIDUAL MANDATE administered by “partisan-free” IRS. Get one or PAY a FINE (if ur a Repub).

Traitor John Roberts has already blessed the “myRA” by declaring: “Hey, It’s Just a TAX.”

TeaPartyNation on January 30, 2014 at 1:58 PM

At one time I sold life, health, and fire insurance on what they called a debit account, which means I would go into these poor neighborhoods and collect their monthly premiums. Beside their front doors, usually hanging on a nail in the door frame would be cardboard pockets that held the insurance payment record.

Typically there would be one for each member of the family. Not all lived there since they usually had a mailing address and an address where they lived. This represents a way of life that most of us would never know existed if you were not familiar with the poor and how they typically live their lives.

They usually were only interested in buying enough life insurance to insure that they had enough to be properly buried or they could bury their children.

The reason was easy enough to understand. If they bought more, someone was likely to kill them to collect it.

Social security is a safer and traditional retirement plan, but even that is a risk for them.

Having a myRA that would pay out if they died is every bit as dangerous to them as buying more insurance than they need for burial. They would not do it for that reason, even if they had enough left over each month to invest in retirement.

Franklyn on January 30, 2014 at 2:08 PM

Where does Obama get the Constitutional authority to implement his MyRA scheme?

Colony14 on January 30, 2014 at 7:51 PM

B O H I C A

mad scientist on January 30, 2014 at 9:02 PM

With his buddy and Chicago crony in the IMF running around telling broke nations to cut pensions (for people already retired) and raid bank accounts, putting your money in this is rolling the dice. This must be part of the plan to nationalize IRA’s and 401k’s. First make it voluntary, then “encourage” it while penalizing private accounts, then require it and outlaw private accounts, then all your money is the governments.

Spartacus on January 31, 2014 at 9:00 AM

Obamacare is so wonderful, why not give all your savings to the government, too? After all, they’ve got your health care and student loans and taxes, why not just give all your money to the government and receive an allowance?

claudius on January 31, 2014 at 9:38 AM

Give your money to the government so it will be safe??? Remember Social Security Accounts? Remember Medicare??? Since when is money in the hands of government safe????

old war horse on January 31, 2014 at 10:20 AM

Well, managing healthcare went so well, so why not let the government manage retirement?

Even Democrats will have no stomach to fight for another massive Obama disaster.

When he fails again, he’ll blame Republicans for not making it work.

virgo on January 31, 2014 at 11:11 AM

Guaranteed Return … the lying liar just can’t stop himself.

Taking physical possession of a bond has a guaranteed return as long as the US Treasury can do so.

However, a bond mutual fund in times of rising inflation is guaranteed to lose value.

Given the current state of interest rates, the myRA is likely to be a heck of a ride.

Carnac on January 31, 2014 at 3:53 PM

The President is untrustworthy and is a serial liar so I reject anything he proposes now out of hand.

zoyclem on February 1, 2014 at 5:37 AM

A lot of mutual funds run accounts in which you can sign up and autoinvest for as little as 20 bucks a month.

This is just another govt scam to get more money into the govt today as they are REFUSEING to cut back on deficit spending.

under obama the govt has run a minimum of trillion dollar deficits each year.

OH, and this is the same govt that keeps saying social security is going broke, and we know why, they have been using it to finance thier deficits for decades

this new myRA is just another scam for the spending junkies in DC.

sniffles1999 on February 4, 2014 at 7:36 AM

I remember obama saying in 2007 he will cut the deficit in half by the end of his first term, well he at least DOUBLED IT.

now they want MORE of our money.

hey how about obama cut back on the multimillion dollar hawaiin vacations first

sniffles1999 on February 4, 2014 at 7:39 AM

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