Thursday, January 30, 2014

WARNING Protect Your Savings: Stay Away from Obama's New MyRA Program

It's a trap. It will make your savings highly visible to the government, very vulnerable to future special taxes and it drives investments in the direction of financing the government with your savings, rather than the productive private sector. That's what myRA is all about.

Here's how Treasury Secretary Jack Lew explains myRA:
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.
The interest rate on myRA is going to be the same as the one paid by the Thrift Savings Plan Government Securities Investment Fund. The TSP itself admits about this interest rate:

The G Fund is subject to inflation risk, or the possibility that your G Fund investment will not grow enough to offset the reduction in purchasing power that results from inflation

In other words, it's a terrible investment. The US is on the edge of bankruptcy and the only way they can avoid bankruptcy is to print more money. Thus, a loan to the government (which is what this is), and without major protection against inflation, is a terrible idea. And it is going to be run by a crony Wall Street firm. A private-sector money management firm is going to be chosen by the Treasury to run the program.

Think about this.

Do you really want to place your money in the hands of an Obama-Lloyd Blankfein type money management team?

The President signs the presidential memorandum directing the Treasury to create myRA.


  1. Whats the bet it will become compulsory (just like in the 5th freeest nation in the world dotcha know)

    1. They won't have to make it compulsory

      In our alternative world of EPJ, LRC, and the like, there has for several years been a discussion of government takeover of IRAs / 401(k)s. I have long felt that individuals would flock to this - because the government will provide a "make whole" provision.

      Coincident with the next market crash, the government will offer to those with retirement plans a new plan (it seems myRA is now the medium); the plan will be invested in treasuries.

      You can transfer your retirement account into this new plan. If you do, the government will give you a balance equal to your high-water mark before the crash (perhaps capped at half-a-million or some such, so as not to be seen as a gift to the rich).

      How many will jump at this?

    2. I don't think they will directly takeover IRAs / 401ks, but instead steal the money via means-testing of Social Security and Medicare. In other words, your expected SS check or Medicare premium is based on how much you have in retirement and other assets. If you're sitting on a $600k IRA, expect drastic reductions in your SS payout. In fact, SS is already somewhat means-tested in this regard, since 401k withdrawals count as ordinary income, and SS is taxed extremely heavily (50% I believe) when you also earn ordinary income.

      The only solution to retirement is to keep one's assets in closely-held businesses that are difficult (for the IRS) to place a value on. This is how Williard Romney amassed $20mm in his 401k, when the annual contribution limit is $17k. Putting $17k worth of far out-of-the-money call options in a private equity deal can translate to a million dollar payout.

    3. It all does smack of the Japan savings scam their government forces on its people.

      While it's not compulsory, all that gov't has to do is the Cass Sunstein "nudge" to give people the illusion of choice by writing the tax code in a manner that favors Comrade Obama's new economic plan.

      Kind of like they already do with 401K's really...

      The difference being though, gov't now has another hammer with which to bonk Wall street over the head with.

      Like their money printing though, it's a hammer that if they over use will eventually hurt gov't as well(which is almost guaranteed), as they will cannibalize from the artificially stimulated Wall St. investment going on via 401k's...leaving less for gov't to take from others.

      It's all very interesting, except the fact that these sociopaths are going to cause so much misery in the process that we are all bound to suffer from it in some way, shape, or form.

  2. hahaha, thanks for the warning, but no one on this blog (except jerry) will be putting their money in a "myRA."

  3. With the Fed cutting back on sucking up all the low yielding treasuries, what's a President to do? I say let the dummies that want something for nothing hand their hard earned money over to the government so that the rest of us can have a bit longer to prepare ourselves for the inevitable end game.

  4. In the spirit of fair play would someone advise the NY Times that "even Mises" chose to deposit his cash reserves in the Austrian postal savings system instead of the commercial banks (which he believed to be all bankrupt).

    Indeed, I wonder why Obama did not choose the USPS to service this thing, MyRA. Give those guys something to do and they could use the funds to subsidize the delivery of junk mail.

  5. They know that some of us know that they want to take our IRA so they hope that non-informed buy into this money grabbing scheme.

  6. No one has mentioned that you can accomplish the same result as MyIRA now by opening an account with the Treasury thru and setting up an electronic transfer from your employer's' payroll system to the Treasury to buy US Savings Bonds. The details are right here on the Treasury's website:
    This is the successor to the 'Payroll Savings Plan' that the Treasury retired in the early 1990s. As with MyIRA, you invest in US treasury securities, the money is guaranteed not to lose value, and it is tax-advantaged (you are taxed at withdraw only on the interest accrued, and the interest is free of city and state income taxes). The fact that the president is enacting a plan that is a copy of one that exists already, and the press is not reporting it as such, leads me to believe that there is some ulterior motive at work here.

    1. Perhaps this explains one of the motives:

      "A private-sector money management firm is going to be chosen by the Treasury to run the program."

  7. At a 15K account limit, the aggregate amounts will be too small for the Treasury to even think about. No, this is a scheme designed to get those muppets to save 15K and then roll those sums over into Wall Street. As soon as your account nears 15K, you will get slick ads from some big Wall Street firm with a nice sounding deal.

  8. MyRA - My rectal assault...

  9. Instead of this rather pathetic attempt to get people to save in myRA, how about the Government and Treasury ease the requirements around 401k Plans like the annual 5500, 401k audit and non discrimination testing. Easing these burdens would lead to having more companies establishing 401k Plans where more employees can save.
    - Tom from