President Barack Obama in his State of the Union Address on Tuesday, January 28, 2014, made a revolutionary proposal concerning your potential retirement. In case you missed it, here is a brief discussion of that proposal.
All of us are familiar with the so-called 401(k) plans that enable employees of usually larger companies and businesses a to put aside some of their compensation in certain investments which are not taxable as income when received and which are permitted to grow tax-deferred until withdrawn in retirement. The idea is that those investments will be taxed at presumably a lower rate at retirement than at the current rate.
Until now, if your employer did not offer such a plan, you were out of luck. President Obama's proposal would permit those employees to fund a so-called MyRA account by having a part of each paycheck deducted and deposited in US Government Bonds, where they would be given the same treatment as traditional 401(k) plans.
According to administration officials, millions of Americans who do not have access to the automatic deposit feature of a 401(k) plan are likely to take advantage of the MyRA proposal.
Let me know what you think and whether, if you qualify, you would take advantage of such a plan.
It seems not at all revolutionary, but slightly incremental. It seems it's different from an IRA in that you invest in govt. bonds, and by implication it's insured by the federal govt. ... but then you're stuck with govt. bonds. But the real problem is that it's yet another way to save for people who save; but doesn't do anything for people who are either too short-sighted, or too poor, to save on their own.
ReplyDeleteTom, thanks for your comment. I do think it is at least somewhat revolutionary by offering everyone the opportunity to save in a secure investment (US bonds) and with tax free income. I agree not everyone can or will participate. But by making the withdrawals automatic from the paycheck, at least it will be easier to save. Given our abysmal rate of savings in this country, anything will help. I welcome further comments from you and others.
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