Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Thursday, January 30, 2014
MyRA hyping begins......Treasury Secretary follows up with speech to hype President Obama's State of the Union Executive Action MyRa scheme ..... short answer as to what's in this for the average Joe and Jane - not much !
The MyRA Propaganda Begins: "A Start To A Secure Retirement" Promises Treasury Secretary
You didn't think the US could at first slowly, and then all of a sudden, expropriate retirement accounts and invest them in the "no risk, guaranteed return" MyRA Ponzi scheme introduced by Obama during the State of the Union address without lots of behavior-modifying indoctrination in the "friendly press" first now did you? Sure enough, here is the first major propaganda salvo, coming from none other than the US Treasury Secretary, Jack Lew, which will be published tomorrow across the McClatchy media empire.
* * *
Just out from the US Treasury Department, "Inan op-ed to be published in the January 31, 2014 editions of McClatchy Newspapers, Treasury Secretary Jacob J. Lew discusses myRA - a simple, safe and affordable starter savings account to help low and moderate-income Americans begin building towards a more secure financial future."
myRA: A start to a secure retirement
Over the past five years, our country has accomplished a number of big things. The economy has grown stronger after being shaken to the core by the worst recession in our lifetimes. Our businesses have created more than 8 million jobs. The financial system is more resilient, with better protections for consumers and investors. And investments in domestic energy production have helped put the promise of American energy independence in sight.
In the meantime, health care costs have grown at their slowest rates in years while millions of families now have access to affordable health care coverage so they are not one hospital visit away from falling into financial ruin. Our auto industry is surging even as home values are rebounding. And the federal deficit has been cut by more than half.
So we have made clear progress. But we all understand that we are not where we want to be yet. Too many Americans cannot find a job. Too many Americans who do have a job are not getting paid enough to support their families and make ends meet. And too many Americans do not have the skills they need to succeed in today’s economy.
As President Barack Obama made clear in his State of the Union address, it is time to focus on restoring opportunity for all. That means helping to make sure more Americans can take part in our growing economy and build some economic security for the long term. To get that done, we are putting forward real, concrete solutions to our most pressing problems—from college affordability and job training to fair wages and a stable retirement.
Now, when it comes to retirement, you would think that the vast majority of working Americans would be putting some money away for their future. But the truth is, many are not. For millions of working men and women, it is not easy to save for the long haul. Many employers do not offer a retirement plan. And setting up a retirement account and maintaining it can often be too difficult, expensive and time-consuming.
The statistics paint a stark picture. Only about half of all workers have access to an employer-based retirement plan, such as a 401(k). And left on their own, few workers save. It is estimated that fewer than one out of 10 eligible workers actually contribute to an IRA.
Still, every American deserves the chance to build a secure retirement. That is why the Obama administration has designed a new way for working Americans to start saving for the future. This program, which will begin later this year, is called myRA or My Retirement Account.
This account is designed to help low- and middle-income workers, who are too often overlooked or ignored, begin saving for retirement. We are talking about the waitress who is holding down two part-time jobs to support her kids; the recent graduate who landed a job but is grappling with student loans; the janitor who has never been given the chance to invest in a retirement account.
Here is how myRA, which is simple, safe and affordable, will work.
You will be able to start saving with an initial deposit of as little as $25 and contribute as little as $5 each payday. If an employer chooses to participate, contributions are made through automatic payroll deductions, making them hassle-free.
There are no fees—100% of any contribution goes into the account and is invested in a Treasury security. That means it will be backed by the full faith and credit of the United States, will earn the same interest rate that is available to federal employees for their retirement savings, and the balance will never go down.
Finally, myRA is not tied to any one employer—it belongs to the worker, not the workplace. In other words, the account is portable and can be easily rolled into a Roth IRA. And if myRA savers ever need to, they can withdraw their contributions tax-free, at any time.
MyRA is a specific way in which we can help hardworking Americans save for the future. But there are other things we can do. In particular, the President has consistently called on Congress to help tens of millions of middle class Americans save for the future by opening up access to automatic IRAs in the workplace.
And we will continue to look for ways to help increase economic security, strengthen the middle class, and provide more ladders of opportunity into the middle class. That is how we will help make sure every American can take part in this recovery. And that is how we will help usher in a stronger, more prosperous future for our country.
The “myRA” retirement plans proposed by President Obama in his State of the Union address this week will be structured like Roth IRAs; they’ll rely on a new kind of Treasury savings bond that guarantees them against losses; and they’ll have a $15,000 maximum account balance, according to details disclosed by the administration today. The president won’t need Congress’s approval to get the myRA off the ground, though he will need some logistical help from employers to set up the accounts.
The myRA: A new incubator for small nest eggs.
As the president said on Tuesday night, the myRA is designed to serve people whose employers don’t provide access to a retirement plan—a category that experts have estimated includes about half of all workers. Lack of access a particularly big issue at small businesses, since small employers often can’t afford to offer their own plan. The administration is being careful to label these as “starter” accounts; the emerging details make it clear that the myRA won’t have much value to an investor who’s had time to amass a respectable nest egg.
The name of the proposed new retirement plan doesn’t exactly trip off the tongue—President Obama himself stumbled over the portmanteau acronym “myRA” (rhymes with “eye arr ayy”) during his address. But the proposal took on greater heft as the administration fleshed out the details of the plan on Wednesday: Treasury Department officials briefed reporters on the plans in the morning, and Obama was scheduled to discuss them in the afternoon during a speech at a steel plant in West Mifflin, Pa. (That speech was closed to the public.)
Among the key details:
A new kind of savings bond. The administration says that investments in a myRA will be backed by a savings bond-like security, with the same variable-interest-rate return offered by the Government Securities Investment Fund in the federal employees’ Thrift Savings Plan. That return isn’t exactly world-beating, especially when interest rates are low—as Damian Paletta and Anne Tergesen report today in The Wall Street Journal, the federal fund returned 1.47% in 2012, with an average annual return of 3.61% from 2003 through 2012. But the value of the account would never go down.
No fees, low minimums. A saver could open a myRA with as little as $25, and thereafter, contributions of any size would be allowed, with minimums of as little as $5. That departs from the savings-bond model, in which bonds can only be amassed in fixed denominations of $50 and up. Savers also wouldn’t pay any fees on their accounts. Although many big financial-services companies have eliminated their annual fees on traditional IRAs, those that do still charge fees can eat up a substantial percentage of the earnings of beginning savers.
It’s not attached to your job. Employers won’t be administering, or paying administrative costs for, the myRA—the Treasury Department is going to pick a private sector firm to take care of that. So savers will be able to keep their accounts when they switch or leave jobs. Some consumer advocates hope that’ll help savers avoid the savings “leakage” that happens when workers change jobs and cash out their 401(k) plans. The administration will need employers’ help on one level, however: They want myRAs to be funded by paycheck deductions, which employers would need to set up. The White House says no employer will be forced to take part in the myRA. President Obama has also proposed a separate provision that would require employers who don’t offer retirement plans to set up automatic IRA deductions for their workers, but that would require an act of Congress.
Funded after-tax. The myRA will be structured like a Roth IRA account, which means savers will fund it with after-tax dollars—rather than with a pre-tax deduction, as with a 401(k). That would also mean that under most circumstances, eventual withdrawals from the account wouldn’t be taxed.
Watch out for caps. The myRA will be available to anyone with annual income of less than $191,000—so, in theory, members of Congress could sign up! But more important, once a saver amasses $15,000 in a myRA, he’ll be required to transfer the account to a private-sector Roth IRA.
With its low caps and its potentially low returns, the myRA doesn’t seem especially competitive with more traditional 401(k)s and IRAs. Jeff Brown, a professor at the University of Illinois College of Business and a former senior economic adviser to the George W. Bush administration, noted in an email that the low stakes could actually make the myRA program more palatable to the financial-services industry, since it won’t feel like it faces a threat from a new, Uncle Sam-sponsored rival.