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A Not-So-Worthy Competitor: Uncle Sam's myRA


austin3515

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In case you missed the State of the Union:

http://blogs.wsj.com/washwire/2014/01/29/nine-things-to-know-about-obamas-myra-accounts/

I was a very mediocre Obama supporter and sort of scoffed mildly at people who suggested maybe Obama wanted to take over every aspect of our lives. I suppose I am beginning to see it more there way. What an exceedingly bad idea...

Austin Powers, CPA, QPA, ERPA

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That would depend on your perspective. I don't think this would impact what is currently in place. It appears to be a target to get a larger percentage of the lower class to save. The upper class (i.e. Warren Buffet) saves every dollar he makes; measure by that fact that his purchased aren't contingent on his next paycheck. If the middle class, saving his more consistent because. This would appear to be something to stimulate the lower-middle to the lower class (measured by wealth) to get in the habit of saving.

Personally, I'm constantly telling many of my younger family and friends the importance of saving; even if at a rate of $20 per week. The problem, here, is that many vehicles in the private sector don't support such a low level. Who's going to save $1,040 per year when their 401(k) has an annual account maintenance fee of $100 per year? You're losing 10% already.

The myIRA would appear to offer a mechanism to stimulate saving for those situations where the fees charged in doing so is too high of a percentage of the amount being saved. After you get to a relative low amount ($15,000), then you have a considerable amount to roll into the private market place without getting hammered with fees. I imagine that is the thought behind it.

I would like to see (and hear) more before passing judgment.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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There is no 'all things to all people'. So, there may be a few small business owners who choose not to do a 401(k) because of this option. That, alone, does not make it bad policy. To suggest that it does would be like suggesting SIMPLE IRAs are bad policy; for no reason other that a TPA losing a potential client. I can appreciate argument, but believe there are other things to consider.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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I'm an ASPPA member, but I do not agree with 'all' their lobby efforts. I believe there are merits to the myRA when you consider the population for which it should have the 'most' impact.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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An employer would typically choose to sponsor a qualified plan where they see the benefit of doing so. Choosing a myRA or other goverment sponsored option would have no effect on that decision in the same manner as a current IRA option does today.

Any SIMPLE IRA or SEP sponsor is a potential client for me tomorrow. Once they get their feet wet, they will jump into the pool sooner or later.

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I must say, I find it hard to get too worked up over this. I don't see it as much of a threat to the TPA world. I expect it will not amount to much in the larger scheme of things.

Of course, I also predicted that Larry Bird wouldn't be that great as a pro basketball player, and predicted that the Patriots would handily defeat the Broncos in the AFC championship game, so my track record as a prognosticator is suspect at best!

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I think myIRA is a fantastic idea, and i don't think it will have the slightest impact on the number of employer-sponsored plans in existence or to be created in the future. Whether myIRA is actually implemented and if so whether the people it is targeting will use it is another story.

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It does impact for a small business owner who would otherwise sponsor a 401k plan but decides not to because of this other option. I have a friend who is a business owner who would do this in a heartbeat.

Really?

If your friend who is a business owner can attract and retain good employees without offering a 401(k), she's doing a lot of other things very well. And if a low return, principal-protected savings plan is the best fit for her workforce, then it would be hard to justify adding the personnel, costs, and headaches of sponsoring a 401(k).

I'd be surprised if myRA takes away or slows the growth of any business that provides services to qualified plans. (That said, I too was surprised by Larry Bird in the NBA.) As 12AX7 says, it is more likely to increase business over time.

And I'm guessing that ASPPA isn't the only PAC that's using this wonderful/terrible idea as a reason to call for more donations.

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Re: Larry Bird comments

How long did you remain surprised that he was so good a pro basketball player? One season, one game, one quarter?

Most of the surprises with respect to his pro basketball career after a very short time in the league were in connection with some of the remarkable plays he made. That he would be a very successful pro became obvious very quickly.

Always check with your actuary first!

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ASPPA's big disagreement with the SOTUS is that the President disparaged the current retirement system really only benefited the rich, that they were "upside down retirement tax incentives."

I wholeheartedly agree.

President Bush went down a similar avenue, albeit it had to do with supplementing/changing the Social Security system. First it was Lifetime Savings Accounts in 2003, then Individual Investment Accounts in 2005. Both ideas went no where.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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This just in: US Govn't announces its myRA conduit IRA Rollover product. Thing is, this new IRA has a choice of two investments: a US Postal Service or Amtrack bond. Send a letter or take a train ride and help your account to profitability!

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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Can I do $15K a month?

Wish I could!

Haven't seen much material on the proposal, but it appears to be intended to serve as a step into the world of saving for retirement for people with limited ability to save, and that if it converts to an IRA once the balance gets to $15K, wouldn't it be expected that any further retirement savings would be pursued through an IRA?

I am somewhat haunted by the comment made earlier "If your friend who is a business owner can attract and retain good employees without offering a 401(k), she's doing a lot of other things very well." I can remember a time when business owners actually had to strive to attract and retain good employees. I can remember a time when new college graduates could find work with greater career potential than bicycle messenger or convenience store clerk. I can also remember banks and gas stations giving away toasters and drinking glasses and other goodies to attract customers. Guess I'm showing my age!

Always check with your actuary first!

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I will reserve judgment on whether or not this means competition until I find out what the max is. Presumably it will not be higher than an IRA contribution, in which case I would agree that maybe this won't be so bad.

As a matter of policy, the same friend I referenced above who employs a lot of "low skill/low pay" employees has offered to hundred of employees over the past 3 years the opportunity to have payroll deduction IRA's and not one has taken the option. You can't get water out of a stone is an old adage that comes to mind...

Austin Powers, CPA, QPA, ERPA

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