Obama's "myRA" Proposal - Your Thoughts?

[Exterous]

While not terrible I question some of the reasoning behind it especially this:

The program is geared toward low- and middle-income Americans who lack the upfront investment that many commercial IRAs require.

Its not like over 50% of the IRA market has no minimum IRA plans or anything...

Oh and the major players don't require a visit to a physical location to enroll so the barriers to entry are pretty goddamn low

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We've had others, but for various reasons Congress has either rescinded them or burdened them with participation requirements which reduced their appeal.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 ?

I would imagine the creation of a new plan is easier and avoids any unintended consequences of modifying old plans, esp if you're going to limit the fund types although it does so at the expense of muddier waters. Complexity does not entice people to save for retirement.

I don't really get the forced transition from a mRA to an IRA. If this is about the auto opt in why not just encourage employers to allow that availability into a 401k or IRA account from the start. Seems like adoption would be easier than getting people to offer yet another type of retirement account

Also, while I appreciate the proposals avoidance of fees and potentially very risky investment options - all those benefits go away when if they are required to roll over to an IRA after $15,000. And given that $15,000 is a drop in the bucket for retirement it seems like a lot of effort for likely little return

 

[Exterous]

On a slight side note I found this recent article very interesting:

The most commonly cited measure of retirement income ignores at least 60% of the money that seniors receive.

There is a widespread perception that most Americans are inadequately prepared for retirement. The story pushed by pundits and policy makers is that the shift over the past 30 years from defined-benefit pensions to defined-contribution savings plans such as 401(k)s has dramatically reduced retirement income to supplement the benefits provided by Social Security.

The CPS measures the sources and amounts of income received by American households, including income from retirement plans. The Census Bureau's definition of income, however, includes only payments made on a regular, periodic basis. So monthly benefits paid from a defined benefit pension or an annuity are counted as income, while as-needed withdrawals from 401(k)s or IRAs are not.

This definition of income obviously understates the resources available to retirees. And this understatement will only grow as more and more Americans save for their retirement through defined-contribution plans and not from defined-benefit plans.

The misperception about retirement income becomes clearer when other data are taken into account. For 2008, the CPS reported $5.6 billion in individual IRA income. Retirees themselves reported $111 billion in IRA income to the Internal Revenue Service. The CPS suggests that in 2008 households receiving Social Security benefits collected $222 billion in pensions or annuity income. But federal tax filings for 2008 show that these same households received $457 billion of pension or annuity income.

In combined terms, the Current Population Survey that ostensibly documents how poorly pensions and individual retirement plans provide retirement income ignores at least 60% of the income being delivered to retirees. Even that is not the whole story—because tax filings do not include distributions from Roth plans, since those distributions are not taxable.

http://online.wsj.com/news/articles/SB10001424052702304603704579329012635470796?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304603704579329012635470796.html

 

[boomerang]

Nearly Half of America Lives Paycheck-to-Paycheck

 

[Hacp]

Why doesn't he start by raising the limit of 401ks and IRAs?

 

[Exterous]

Nearly Half of America Lives Paycheck-to-Paycheck

I believe, behaviorally, this is the point behind the Opt-Out plan. Many people spend up to their paychecks even though its not a necessity to make ends meet. By reducing their take home pay they would continue to spend up to the new lower limit but there is money actually going into savings.

Out-Out plans are generally found to be much more effective in getting people to do things compared to Opt-In plans. Studies have shown that people have an aversion to doing minimal work to Opt In even if its as simple as checking a single box or hitting reply to an email

 

[werepossum]

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

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.

Exactly, and well said. Government will take your money, spend it, then when you need it to retire they'll simply take more money from your children and pay you back. And once it's in place, Democrats can rant about the return being too little to be a liveable retirement and then take even more money from productive people to buy your vote.

 

[Texashiker]

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. .

My truck is a 96 T100, its been paid off for about 10 years.

House was paid off a couple of years ago.

Like I said, my wife and I are just now getting to where we can start putting money up. For the past 13 years 20% of my income has been going to child support. That will come to an end in May of this year.

 

[stlc8tr]

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.)

I'm not a big fan of the current MyRA proposal but I don't think anything like it currently exists. There are bits and pieces available from different providers but nothing that offers everything under one roof.

For example, Fidelity has a no-minimum waiver available but it's only if you sign up for a $200/month monthly contribution.

https://communications.fidelity.com/mlz/retirement/traditional.html

Ally offers a true minimum no fee IRA account but it's in a CD.

http://www.ally.com/bank/ira/high-yield-cd/

 

[Exterous]

For example, Fidelity has a no-minimum waiver available but it's only if you sign up for a $200/month monthly contribution.

I wonder if Fidelity has some lingering outdated information somewhere or thats for a specific fund but:

There is no minimum dollar amount required to open a Fidelity IRA. Some mutual funds may have minimums required to purchase; review each fund’s prospectus for details.

https://www.fidelity.com/retirement-ira/ira/ira-rules-faq

I can tell you from personal experience that it is possible to open a Fidelity IRA account with no minimum and no $200 commitment