Skip to comments.MyRAs Are the Wrong Way of Helping Ordinary People Save Money
Posted on 02/03/2014 5:55:59 AM PST by Kaslin
As part of his State-of-the-Union speech, President Obama announced he was going to unilaterally create a new retirement savings account that supposedly would be available to all workers.
Employers would be mandated to facilitate these MyRA accounts, and the money collected would be invested in guaranteed government bonds.
There are some good features to the MyRA plan, most notably the fact that money in the accounts would be protected from double taxation. Workers would put after-tax money in the accounts, but there would be no additional layers of tax on any earnings, or when the money is withdrawn.
In other words, a MyRA would be akin to a back-ended (or Roth) IRA.
But there are some bad features, including the fact that taxpayers would be subsidizing the earnings, or interest, paid to account holders (though this would be a relatively benign form of government spending, at least compared to Obamacare, ethanol, etc, etc).
My biggest complaints, though, are the sins of omission, which I discuss in this interview for Blaze TV.
Dan Mitchell Discussing President Obama's New MyRA Proposal
Simply stated, if Obama was concerned about low returns for savers, he should be directing his ire at the Federal Reserve, which has artificially pushed interest rates to very low levels as part of its easy-money policy.
But more importantly, MyRAs will be very inadequate for most workers with modest incomes. If the President really wanted to help ordinary people save for retirement, he would follow the successful example of more than 30 other nations and allow workers to shift their payroll taxes into personal retirement accounts.
This video explains why reform is so desirable.
Saving Social Security with Personal Retirement Accounts
Critics say it would be very expensive to make a transition to this modern system, and theyre right. If we let younger workers put their payroll taxes in a personal accounts, well have to come up with a new source of revenue to finance benefits being paid to current retirees and older workers.
And were talking lots of money, as much as $7 trillion over the next few decades.
But thats a lot less than the $36 trillion cash shortfall that well have to somehow deal with if we maintain the current system.
In other words, were in a very deep hole. But if we shift to personal retirement accounts, the hole wont be nearly as large.
P.S. The video mentions that Chile and Australia deserve special attention. Click here if you want to learn about Chiles successful system and click here if you want to see how Australias superannuation system has been a big winner.
P.P.S. Some people already have asked me whether I was too Pollyannish in saying that theres no risk for several decades that Washington will default. I could be wrong, of course, and I have shared BIS, OECD, and IMF data that reveals the United States has gigantic long-run fiscal challenges. But as I said in the interview, I think most other welfare states will collapse first, and that will lead to flight capital coming to America, which will help prop up our system.
P.P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate dark humor.
P.P.P.P.S. You probably dont want to know how Obama would like to fix the Social Security shortfall.
This is not your Bismark America, this is another Cuban scam.
MyRAs are a way to sucker poor people into giving their savings to the government in preparation for the nationalization of the pension system. This country is so addicted to spending that its coming.
Anyone that thinks this is anything more/less than another way to fleece people is a fool.
If its the wrong thing to do, count on us to do it. Nowadays the more absurd something is, the more likely it will be implemented.
All I need to know about MyRAs is that it is a rat proposal and therefore, not good.
When Germany wanted their gold back they were refused.
Once implemented, all Obama has to do is trigger a plunge in the stock market, and people will be jumping into MyRAs like rats off the Titanic.
“the money collected would be invested in guaranteed government bonds.”
There is no “guarantee” on anything when it comes to dealing
with communist government officials, especially Obama.
The goal is to get this passed and then force everyone to
roll all their retirement into this and then eventually
roll it into Social Security. In other words, they want
all retirement accounts put in the governments general fund
so they can blow it. If this goes through, the next thing
will be physical personal property. The goal is that you
will not be allowed to own anything, not even yourself.
It’s communism 101, and we are steadily marching right
The early word on the street is that the Obama administration is going to build a website where you can log in and sign up for your MyRA account. You’ll have to enter your SSN, checking account number, and some other personal info, but it’s all cool.
Only the opening probe in the move to get ALL RETIREMENT monies scarfed up by the Government.
All MyRA is going to do is to eventually steal all IRAs and force them to roll into MyRAs and steal the surplus, just as they do now with excess Social Security and Medicare tax revenues.
They're not intended to help anybody save a darn thing.
They're a vehicle for our government to eventually confiscate 401Ks and IRAs.
The problem is - what do you do with the elderly poor who, culturally, morally, or intellectually didn’t have the wherewithal to save for the period when they could no longer work?
I know the simple answer is “screw ‘em, they should have”, but can we really do that?
The harder answer is to try to get them to see earlier on the consequences of spending every dime that passes through their fingers. But, if you could do that, you’d be solving the entire poverty problem as well.
For the majority of working class people in this country, there’s not much in the way of disposable income these days left to invest in anything. People can barely make ends meet, and often that means buying on credit or “borrowing” from savings. I just don’t see where the money comes from to “invest” in MyRAs.
In Obama’s Amerika only the wealthy have money and they’re too smart to buy low returning investments and watch the value of their assets being eaten up by inflation.
MyRA - by the people that brought you Social Security, and with the added help of the IRS.
What could possibly go wrong?
exactly - it is a wealth distribution scheme.
Everyone has a fundamental right to a secure retirement, right? (gag)
What problem was Social Security supposed to solve when it was started?
It's turned into Federal Welfare and a second tax revenue stream for the general fund (all current tax income minus current expenses.)
The answer isn't starting a third taxpayer supported system.
SS was supposed to be “supplemental”, IIRC...
Yes, that was supposed to “solve” the problem that I proposed, but it wouldn’t even if the thieves hadn’t been robbing it, because of the “supplemental” nature of it.
The receivers still needed to not spend every dime that passed through their fingers and lay some up for retirement.
The article makes some good points, but leaves out what I see as a crucial fault in such government schemes.
The savings which an employee puts into these new accounts is simply like buying government bonds. There is no market involvement, and none of the money is in the investment market: it is only being used to cover government debt, and to help defer the debt until time of withdrawal.
What I see as a huge problem is that the Fed is doing the same thing with its negative-interest-rate policy. There is essentially no normal supply and demand situation to create a real capital market. The interest rates are manipulated, when they should be determined by supply and demand for capital, which leads to disciplined, prioritized investment. Instead, we have a hodgepodge of government programs, and a debt bubble not only in government debt, but in misallocated private investment.
The MyRA is a stupid bit of diddling with programs by a person or persons who basically do not know what they are doing.
Why should one sort of savings instrument like this have special tax advantages, when a truly productive investment in the free market for capital gets taxed repeatedly? No wonder we are not producing very much anymore. And then we have pitiful ads like to one during the Super-duper Bowl in which a superannuated folk singer (Bob Dylan) urges his audience to buy American cars just because. We are supposed to make possibly stupid purchases because it is patriotic. Huh? This is told us by a guy who never showed much sign of love-of-country in the 70s.
Here is the basic economics: an interest rate in a market is a price the price of borrowing money. It is a function of the supply and demand for money available for use for (among other things) investment. The Keynesian fallacy is than if we adjust interest rates by sleight-of-hand, we will improve the economy. It is the same idea as fixing prices in an attempt to accomplish some politically favored goal. It doesn’t work, and it causes really big problems on its own.
We know this from theory, and we should know it from the lessons of history. Unfortunately, mobs don’t learn from history. Usually, they not only do not foresee any problems, but when the problems actually occur, they usually dont even know what is happening.
In the meantime Obama mandates ‘workers’ buy ethanol tainted gas which raises the price of both gasolinecand food. BS expensive “green” energy is mandated raising the cost of energy. Oil exploration is stalled raising the cost of gasoline and diesel. Taxes are raised. Obamacare is mandated... BUT go and put your money is a pathetic government scheme that won’t even keep upnwith inflation because you will have so much left over.
The working taxpayers will alone foot the bill for this because we are the “rich” they always refer to. The truly rich are mostly democrats and will therefore not pay anything to support this or will be exempted. The real rich don’t pay much in income taxes because they are allowed to list their profits, royalties, etc as other than taxable income. They have long been given the tools to shelter what would otherwise be taxable income so that is a non-starter.
We pay for it when we have very little to put toward our own savings and retirement accounts thanks to this Nazi Socialist dictatorship and the economic ruin they are pushing on us.
It also has a lot to do with nationalizing (seizing) our retirement accounts and rolling them into this unconstitutional theft scheme.
How much longer is this going to be debated? Are we going to still be debating this as they march us off to the concentration camps and ovens?