The myRA- The Flawed Investment
The following article is about the MyRA, a savings vehicle proposed by President Obama during the State of the Union. While he made it sound exciting, it’s not. In fact, for those that invest in the MyRA, especially if you’re young, will end up being a future disaster.
One of the key problems is that the investor can only invest in Government Bonds, or buying US debt. We have over $17 Trillion in debt, and some Countries have slowed or stopped buying our debt. It’s a nice way to try and replace other Countries to buy our debt so the government can keep spending money.
Read the article. Ignore the political noise in the article.
The best way for any investor to succeed always goes back to the same answer- INVEST IN A GLOBALLY DIVERSIFIED PORTFOLIO. No tricks needed. A regular IRA or a Roth IRA is always the best vehicle- for low-income or high-income wage earners!
myRA is a Flawed Idea from a Desperate Politician
Who is he kidding? Obama must be concerned about his declining popularity in the polls or losing the Senate in the Fall elections. Why else would he support myRA as a solution for the nation’s retirement savings woes?
I guess you could say some retirement savings is better than no savings. But, why would Obama commit political capital to a flawed plan? I can think of two primary reasons. It sounds good to low income Americans and it increases the number of people who will vote Democrat in the fall.
Obama may also be using myRA as political grandstanding to divert the American public’s attention away from his shortcomings as President. Everyone knows Americans live from headline to headline. His recent record, can you say Obamacare, will be yesterday’s news if he creates some new headlines.
Low Income Americans- Does he really believe low income Americans, if they have jobs, have discretionary dollars they can afford to lock-up in retirement accounts for the next 30 years? It is hard to save for retirement when your goals are adequate food and shelter for children.
The $5 Solution-
Can you really solve your retirement problems by saving $5 per month? So what if you reach the lofty goal of $15,000 in 30 years? This will produce $60 of additional income per month at a 5% distribution rate. But, that is before inflation has eroded most of the purchasing power of the $60. The real value of $60 in 20 or 30 years might be $20, which just might be the cost of a dozen eggs.
Government Bonds- If Obama was really trying to help lower income Americans why did he limit myRA investments to government bonds that are producing historically low rates of return? Back out the impact of inflation and you barely have a positive performance.
Why wouldn’t Obama create higher performing investment pools not limited to government bonds? Then let Americans, who are smart enough to make 401(k) choices, select the pool that makes the most sense for them. Their choices could be driven by their tolerance for taking investment risk. This is better than the one-size-fits-all approach of the Obama administration.
The reality is if you are going to save small amounts of money you are even more dependent on performance to accumulate the assets you need for a comfortable, secure retirement.