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Old 01-29-2014, 07:44 AM   #21
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Originally Posted by jon-nyc View Post
That 15k limit isn't an annual limit, it's a total limit. This is clearly something designed to encourage small-scale saving by people who presumably aren't doing so today.

I would say its of little or no interest to the ER crowd, except as a potential place to store part of your emergency fund for a better-than-market interest rate.

Here's What You Need To Know About MyRA - Business Insider
From the businessinsider article:

Accountholders could accrue balances of up to $15,000, at which point they'd have to roll the balance over into a regular, private Roth IRA. Voluntary rollover and withdrawal would be available anytime, and it looks like normal Roth IRA withdrawal penalty rules would apply.

Yes, I see how it might mean a total of $15k. However, it might also mean that you can only have a maximum of $15k at any point - then you roll that over - and start at zero again. If it's truly a maximum limit (forever) that doesn't sound like much money. For some people that amount would be the equivalent of 1 year of pay in which case it is a relatively large amount. But if MyRA is available to household incomes up to $191k then it's not exclusively for the low wage earner.

I hope more details are released soon.
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Old 01-29-2014, 07:45 AM   #22
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Those who value the opportunity provided by this or any other legislation will take advantage of it. It's an additional way to diversify. I have learned not to look the gift horse in the mouth.
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Old 01-29-2014, 07:48 AM   #23
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I believe anything that makes it easier for people to save is a step in the right direction. The people on this board are just a very small slice of the general population. There are many who never make over $25000 or $30000 a year (or even less) and life is difficult for many, many folks. Setting up an IRA sounds easy to those of us here, but not so easy for everyone to do (especially without falling prey to the many financial advisors who will take their share).
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Old 01-29-2014, 08:06 AM   #24
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I can't see any reason to sign up for a MyRA unless there is a rich government match and seriously subsidized interest rate. I have trouble seeing why anyone would choose on their own to sign up but it sounds like employers will be forced encouraged to sign up employees. I assume there will be an opt out option for employees.

People without 401ks are able to have deductible IRAs unless they have very high incomes. I suspect most low income individuals would be better off with Roths unless there is a big fed contribution but that's another discussion. The lower income people aren't doing this now in significant numbers. I don't want to say they don't understand the need to save for retirement. I just think they have other priorities. Possibly, it could be food and shelter but it very well could be iphones, booze and drugs.

I have a hard time seeing where just increasing the SS tax rate wouldn't do the same thing financially for lower income individuals. The downside is it would politically be a clear "tax increase" versus an automatic enrollment in a Treasury Department plan. It seems to me that Congress would have to implement the MyRA or the SS increase. I could be wrong.

If I was a member of Congress, I'd have a hard time choking down how this really benefits anybody in a meaningful way. Politically, how serious is the Obama admistration going to push this? There were many other items brought up in the speech that would seem to me (IMHO) more significant to furthering his agenda as I see it than this. Of course, this is so minor nobody may care enough to fight against it.
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Old 01-29-2014, 08:21 AM   #25
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Pluses:
- It gives everyone access to the equivalent of the TSP G fund. I don't currently have that and would like that. The government would borrow some of their money through this MyRA fund, like they do with the G fund.

- I think most of us know cash strapped folks who are unwilling to commit to a significant retirement savings because they feel they don't have the bandwidth. This starts the process for them, even if it's just a token. $5/month should be something even the most cash strapped should be able to do.

- For me - having another spot to save is good. Is this a front door Roth path?

Minuses:

- Government has slightly higher interest rates for a *SMALL* portion of their debt (by percentage) by shifting some borrowing to this G-fund like instrument away from traditional short term debt.

- Another set of rules/implementations have to be created/debugged/implemented by the IRS/Employers. That has a cost to taxpayers.

- It's unlikely to change the behavior of very many people. Savers will take advantage. Spenders will still find reasons not to save.

Since the POTUS is doing this by executive order it will happen. Can't call it DOA.
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Old 01-29-2014, 09:08 AM   #26
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It sounds like a ROTH that has no option for investing in the stock market. These folks would be so much better off if it invested in a Total market index fund over their lifetime.

The only advantage I can see for people is if either there is some government match (that mimics 401(k) employer matching) or it somehow entices folks who aren't saving at all to start saving.

I suspect adding ANOTHER type of tax advantaged account will simply make it more confusing to the target audience (people who don't already use the existing accounts).
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Old 01-29-2014, 09:10 AM   #27
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So much depends on the rules and details that have not been released yet.

Quote:
Accountholders could accrue balances of up to $15,000, at which point they'd have to roll the balance over into a regular, private Roth IRA. Voluntary rollover and withdrawal would be available anytime, and it looks like normal Roth IRA withdrawal penalty rules would apply.
Depending on how this is implemented, it could be a way to backdoor 15,000 into a Roth IRA, possibly more than once as long as it is done in 15,000 chunks? If so, I can see lots of people who are not the target demographic small savers being very interested in doing this. Too much depends on details we don't know (and may not yet be decided) to really understand how this will work.
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Old 01-29-2014, 09:14 AM   #28
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It sounds like a ROTH that has no option for investing in the stock market. These folks would be so much better off if it invested in a Total market index fund over their lifetime...
I had a similar thought..

It made me think about HSAs and whether the majority of folks with HSAs use the money as an investment in the stock market or use the money like a savings account with the debit card option.
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Old 01-29-2014, 09:31 AM   #29
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Yet another form of IRA is as welcome as a viewing of MyRA Breckinridge. Instead, simply let those who can make a tax-deductible tIRA contrib do so and, if they wish, immediately invest it in "Fed IRA Bonds" that pay X% more than Treasuries. AFAIK that accomplishes the goal of the President in a simpler fashion.
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Old 01-29-2014, 09:35 AM   #30
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No surprise, but I agree with the skeptics here.

When listening last night, I literally cringed when I heard these words:

Quote:
guarantees a decent return with no risk of losing what you put in.


I hate that this reinforces the idea to the general public that you can have your cake and eat it too. Note how in his speech, he earlier mentions how the stock market has doubled in the past 5 years, and then talks about 'decent returns' in this plan. Of course there was no direct tie in, but I think it creates a mind set for the listener. How do the inflation adjusted returns of a 'no risk' plan compare to the same returns of a balanced fund?

Higher reward means higher risk (or at least higher volatility). Implying to people otherwise is.... OK, I'll self-moderate here.

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Old 01-29-2014, 10:28 AM   #31
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From Marketwatch: Will the ‘myRA’ retirement plan take off?

Quote:
The plan, which Obama dubbed the “myRA” (rhymes with the initials “IRA”), is designed to create “starter accounts” that would help novice investors avoid some common pitfalls of retirement savings.
Quote:
But what Levine and others want to know is how long someone would have to hold a myRA before they can roll the money into their traditional IRA or other retirement account. “If the hold time is too long, I think it will diminish a lot of interest, as savers may choose to invest their money in something other than government bonds,” he said.
Will Obama's 'myRA' retirement plan take off? - Encore - MarketWatch
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Old 01-29-2014, 10:35 AM   #32
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NOT thinking yet another government program is the answer...but taking on a glass half-full, non-personal gain perspective...

Say a young, non-saver puts a modest amount in MyRA as a rainy day savings (knowing they can get most of it out penalty-free if they need to). Some fraction never have a rainy day and reach $15k. Then they set up a periodic transfer to an investment account that has more risk, but also more growth potential. They still have their $14K or $15K rainy day money, but they've got the "overflow" in, say, equities.

Sounds like a way for younger, low earners to start with an asset allocation that lets them sleep at night (100% 'cash'), and slowly grow into an AA that has the potential to grow faster than inflation. And they can do that when they can 'afford' to (once the rainy day account is funded).
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Old 01-29-2014, 10:56 AM   #33
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DOA, as far as I can tell, just like about everything else he wants.
+1. CBS reported that in the 2013 SOTU last year Pres Obama offered up 41 programs he'd like Congress to act on, only 2 were adopted. This was the first SOTU in my entire adult life that I didn't even tune in, it's all just talk nowadays.
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Old 01-29-2014, 11:33 AM   #34
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I would assume you have to use earned income like you presently have to do with a Roth? The links did not mention this. But if you didn't need earned income I would dump 10k of my pension money into it to draw the interest tax free.
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Old 01-29-2014, 11:45 AM   #35
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No surprise, but I agree with the skeptics here.

When listening last night, I literally cringed when I heard these words:





I hate that this reinforces the idea to the general public that you can have your cake and eat it too. Note how in his speech, he earlier mentions how the stock market has doubled in the past 5 years, and then talks about 'decent returns' in this plan. Of course there was no direct tie in, but I think it creates a mind set for the listener. How do the inflation adjusted returns of a 'no risk' plan compare to the same returns of a balanced fund?

Higher reward means higher risk (or at least higher volatility). Implying to people otherwise is.... OK, I'll self-moderate here.

-ERD50
The G fund in TSP. A decent return (I think it's 2.25% now) and no risk.
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Old 01-29-2014, 12:13 PM   #36
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I like the idea of a 'G-Fund for all'. If that's what this is. It'll encourage the "little people" to invest knowing that they don't have to worry about possibly losing a large percentage of their limited money by investing in equities. At the same time getting much better returns than a regular bank account savings or short term CD. The term "decent return" is relative. Some may think 2% is far from decent and that's fine but it's guaranteed not to be negative. Where do I sign up?
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Old 01-29-2014, 12:15 PM   #37
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The G fund in TSP. A decent return (I think it's 2.25% now) and no risk.
If that's what the actual proposal is, and early reports indicate it is, then I'm not seeing a lot of downside to this. True, young workers should really be primarily in the stock market, but the lure of higher interest than is available elsewhere may very well get some people who aren't currently contributing to their retirement to begin.

The reports I've read also indicate that this can be done via executive order, without action by Congress. If so, the objections that Congress is unlikely to go along with any Obama proposal disappear.

In a lot of ways, this proposal has a similar flavor to way back when the Treasury began offering I-bonds in addition to series EE savings bonds. I-bonds have become a standard part of many people's investments and so might these new MyRA accounts. They shouldn't be the only component to retirement savings, but they may very well be a part of it.
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Old 01-29-2014, 12:29 PM   #38
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I like the idea of a 'G-Fund for all'. If that's what this is. It'll encourage the "little people" to invest knowing that they don't have to worry about possibly losing a large percentage of their limited money by investing in equities.
If I am understanding it, it will also be a guaranteed government controlled funding mechanism for the Federal government.

Ha
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Old 01-29-2014, 12:54 PM   #39
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When I do see more, I'll include a look at the idea from the perspective of a 25 y.o. construction worker or store clerk before passing judgment.
That's why I'm watching, to see how it might (or might not) benefit my 23 yo son who is still looking for his first real post-college job.
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Old 01-29-2014, 01:30 PM   #40
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The G fund in TSP. A decent return (I think it's 2.25% now) and no risk.
1.47% in 2012, 2.45% in 2011. Both lagged CPI (1.7% and 3.0% respectively), so I don't think 'no risk' is appropriate - these people lost buying power, and that is the risk. And I don't think negative real returns are 'decent'. It may be the price someone is willing to pay to remove other risks, and that can make sense in some situations.

Quote:
Originally Posted by aaronc879 View Post
I like the idea of a 'G-Fund for all'. If that's what this is. It'll encourage the "little people" to invest knowing that they don't have to worry about possibly losing a large percentage of their limited money by investing in equities. At the same time getting much better returns than a regular bank account savings or short term CD. The term "decent return" is relative. Some may think 2% is far from decent and that's fine but it's guaranteed not to be negative. Where do I sign up?
I also like the idea of offering a set of funds that meet certain criteria with standardized labeling, and some sort of 'stable fund' should be a part of that (this should apply to all IRA, 401/403's etc). But people should have a choice, even if they need to take a little quiz or something to establish they understand the risks. People who want to invest in funds that may not keep up with inflation should understand those risks as well.

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