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Obama’s ‘Action’ on Retirement Accounts Fails to Anger or Impress

What the MyRA "nest egg" executive order is all about.

by
Bill Straub

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February 1, 2014 - 7:20 pm
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WASHINGTON – President Obama wasted little time implementing one of the major initiatives he proposed during his State of the Union address – a retirement savings plan aimed at workers who don’t qualify for pension benefits.

The president sidestepped Congress to sign an executive order creating myRA, which permits workers to have money deducted tax-free from their paychecks and invested in bonds. The accumulated funds will then be available to the worker when he or she retires.

“It’s a new savings bond that encourages folks to build a nest egg,” Obama said in the State of the Union. “MyRA guarantees a decent return with no risk of losing what you put in.”

Republicans have had practically nothing to say about the initiative even though it was executed via executive order, a process that GOP lawmakers maintain Obama uses to excess in general defiance of the Constitution. But the new program has failed to draw objections from lawmakers.

Even without the Republican denouncement, myRA has attracted only tepid enthusiasm from organizations that might normally be expected to hail a new benefit for future retirees.

A. Barry Rand, the chief executive officer of AARP, said the creation of starter retirement accounts like myRA “could help encourage more private retirement savings for those without employer plans.” But he further noted the program could prove even more effective if workers were provided with more options and enhanced investor protections.

“It’s not what I would describe as an earth-shattering move,” said Brian Graff, executive director and chief executive officer of the American Society of Pension Professionals & Actuaries. “It’s going to help some people without a plan save for retirement.”

But that in itself covers a lot of territory. Most American workers don’t have a pension benefit related to their jobs. Social Security was intended to supplement retirement income and, despite advances, the monthly check doesn’t generally meet a retiree’s needs.

Obama in the past voiced support for automatic employee enrollment in employer-run Individual Retirement Accounts – IRAs – but opted instead for the voluntary plan. The administration has long sought to increase savings, citing a number of statistics establishing that American workers aren’t properly prepared for retirement.

The Center for Retirement Research at Boston College found that 53 percent of households are at risk of not having enough invested money to maintain their living standards in retirement. The accounting firm of Ernst & Young maintains 59 percent of new middle-class retirees will outlive their savings. While 68 percent of U.S. workers have access to some retirement benefits, only 54 percent participate in those available plans.

Obama said in remarks delivered at the United States Steel Corp.’s Irvin Plant in West Mifflin, Pa., during a signing ceremony on Wednesday, that “for those of you who don’t have a 401(k) on the job, don’t have a pension on the job, don’t have a mechanism to start saving — especially younger workers — you can get started now. And in an emergency, you can withdraw contributions without paying a penalty. So it’s a pretty good deal. And what I’m hoping is that working Americans will take a look, because I want more people to have the chance to save for retirement through their hard work. And this is just one step that we can take to help more people do that.’”

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Top Rated Comments   
This proposal is completely out of step with everything else the administration and the Federal Reserve are doing. The government is basically paying for the national debt by confiscating the savings of savers. Furthermore, by creating means tested benefits, disincentives for savings are created.

The government is currently keeping interest rates so low to help pay off the national debt and promote the stock market. Between the unemployed no longer seeking work and Wall Street cashing in because stocks are the only place to earn on investment, an illusion of economic recovery has been created.

What a cruel joke on the American people.
46 weeks ago
46 weeks ago Link To Comment
So the President can decide by himself who gets taxed and doesn't? And Congress is ok with this? They both got to go. Time for new politicians who recognize that they work for the people as opposed to being above the people.
46 weeks ago
46 weeks ago Link To Comment
This is step one. Step two is the next "crisis" in the stock market where IRAs and 401Ks take a hit. The "cure" will be nationalization with all equities converted overnight to the non negotiable "bonds" that supposedly make up the Social Security trust fund. There will likely be a "one time" opportunity to get back your money, BUT since it is tax deferred, and there is a penalty for withdrawal, you will have to pay tax immediately and then lose 10% on top of that. After 30 days or something you will be locked into this "safe" investment unless you fit some criteria like bankruptcy or student loan default that will allow you to take it out.

If you take a "tax deferral" from the government, you are giving them statutory power to do this because you are receiving a "benefit".

The MSM will report this as salvation for the small investor and run specials "proving" that individual investors usually do badly and are, on the whole " better off with a guaranteed 4% return and Social Security".
46 weeks ago
46 weeks ago Link To Comment
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All Comments   (46)
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This looks like an IRA or 401k, except you can only buy gov bonds, giving you a lousy, but somewhat safer, return. I dont see any advantages to it, other than to the gov, since they have more people buying gov bonds, and thus can thus offer lower returns. I suppose it offers workers without a 401k an opportunity to save, but those workers could already have an automatic IRA deduction from their checking account.
45 weeks ago
45 weeks ago Link To Comment
So in contradiction to the constant claims of the Progs and Democrats, the President is publicly admitting that Social Security is -not- a "retirement plan" and -cannot- be relied upon for sole retirement support? And thus modifying it to make it workable or offering folks the option to get out and handle their own retirement can -not- be described as "threatening senior's retirement?"
45 weeks ago
45 weeks ago Link To Comment
Sounds to me like another way for the gov't to borrow money to pay for its programs...
45 weeks ago
45 weeks ago Link To Comment
Is he talking about buying Savings Bonds but allowing the purchase price to be tax deferred?
45 weeks ago
45 weeks ago Link To Comment
"There won’t be any employer contribution involved in myRA like there is in IRAs"
Huh? There's no employer contribution in an IRA. It's totally individually funded. In fact, I don't see the point of this new program; MORE complicated paperwork for employers? Why don't the workers just open their own IRA? Must government and job creators take ALL responsibility for people? When did we abdicate all our adult responsibilities?
45 weeks ago
45 weeks ago Link To Comment
He might have ben thinking of 401k's, which often do have an employer match, depending on the employer.
45 weeks ago
45 weeks ago Link To Comment
The article does not make sense. I suspect the writer got his facts wrong. Another point that makes no sense is that when the value reaches $15,000, it must be rolled into a Roth IRA. MyRA is a "before tax" system. Roth is "after tax". So either, when it reaches $15,000 you have to pay taxes on it when you move it to the ROTH. Or it creates a loophole where you can avoid paying tax on both the front end and the back end.
45 weeks ago
45 weeks ago Link To Comment
I think it gives the government a way to confiscate more money from the working class -- after they confiscate what ever might be left in savings accounts and IRAs.
45 weeks ago
45 weeks ago Link To Comment
Is Obama going to guarantee that when interest rates increase, then the bonds in these MyRA's are not going to lose value like every other government bond will?

Second, since Congress has not funded any program like this, how is the program being financed. Is Obama personally paying the government drones who will be running this program?
46 weeks ago
46 weeks ago Link To Comment
A retirement account that can hold only Treasuries?

That's a trap for the poor and stupid.

http://www.wcvarones.com/2014/01/obama-announces-plan-to-prey-on-poor.html
46 weeks ago
46 weeks ago Link To Comment
Shows ya what I know.... Obama's the first metrosexual president so I thought MyRA was his name when he wears a dress.
46 weeks ago
46 weeks ago Link To Comment
"The president is doing everything he can to make the system work better for middle class families, but he has limited tools.” - in the immortal words of Joe Wilson LIAR!
46 weeks ago
46 weeks ago Link To Comment
This is utter BS. Both conventional IRAs and this "government confiscation" version have a $5500 annual limit. So if you saved for 30 years, assuming a 4% annual return, you would retire with somewhere around $300k.

Now look at the public sector since the rise of public employee unions - Obama's most ardent and lucrative supporters: They can retire typically at 55 with at least 70% of their pay and gold plated health benefits for their lives and the lives of their spouses. This is conservatively worth 2 to 3 million dollars for normal life spans. They contribute very little during their working years and can spend everything they make with impunity knowing that they cannot be fired and that their pay checks and benefits will never stop in their lifetime.

So thanks a pant load Obama for this paltry and meaningless gesture. If you wanted to really help the middle class and achieve fairness, increase the pre-tax saving amount from $5500 to $55,000. Or better yet, calculate the per capita unfunded public employee pension liability and make that same sum available to everyone as government provided retirement . We certainly will all sink under the weight of these costs, but at least it will be fairer than the public sector getting a 10 times better retirement on the backs of the private sector middle class.
46 weeks ago
46 weeks ago Link To Comment
I do not understand why we need another type of retirement savings account.

We already have IRAs. If Harkins has his bill passed we will have 3 different types of retirement accounts outside of those related to an employer.

But this is par for the course with a several or more overlapping jobs programs.

All they have to do is balance a budget, ave sound monetary policy and the like. the rest will take care of itself.
46 weeks ago
46 weeks ago Link To Comment
The "bait" is that the investment is tax-deferred, thus lowering taxable income and taxes owed. But lower-income workers pay little or no tax anyway and in fact often get the earned-income tax credit - a government payment - so this feature is pretty much meaningless.
45 weeks ago
45 weeks ago Link To Comment
The problem with the Roth IRA is the requirement for a minimum investment, typically beyond the means of a lower income worker. (The lowest available seems to be $1,000.)

The problem with THESE is that, based on what little has come out in the way of detail, it amounts to a loan to the government. That means it's (apparently) risk free, but also very low return.

Not to brag, but my worst year out of the last 7 on my 401 k I only got a 5% return. With judicious choices, people should be able to beat the 1% or so that these will be offering.

I'm really surprised Obama did this. For a Democrat or other Leftist to initiate this plan, opening the door to personal retirement accounts that are key to any successful approach at Social Security reform/salvage, makes about as much sense as the Republicans initiating Immigration Reform.

Maybe Al Qaeda put some LSD in the water supply in D.C.
46 weeks ago
46 weeks ago Link To Comment
What we have is a permanent, insular political class whose thinking is entirely wrapped up in the politics of keeping their place at the trough and hence are indifferent to the practical effect of their actions beyond how they will influence the next election. It is like Hollywood, a community of "artists" so-called whose products are indifferent to the true aims of art and are intended simply to arrest attention and sell tickets. Little wonder Hollywood and Washington are such great pals - they are the same animal.
45 weeks ago
45 weeks ago Link To Comment
You got it exactly. It essentially is a tax on stupid people, but regretfully, the most recent elections show that there are way too many of those.
46 weeks ago
46 weeks ago Link To Comment
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