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MyRA: Should the Government Force Us to Save for Retirement?

MyRA

Unless you live under a rock, or have read nothing on the web over the past few weeks you’ve likely seen an article or two about the MyRA plan proposed by President Obama in the State of the Union address about a month ago.

I normally like to steer clear of politics as that’s not really the purpose of the site but was intrigued by the idea behind the concept. I believe it presents an interesting question as to what role the government plays, or rather should play in our saving for retirement. As someone who is more independently-bent part of me bristles on the inside when I hear the government wants to take an active role in another part of our lives.

That said, I’ve seen firsthand how many simply are not doing anything to save for retirement, so it seems some sort of action is needed. I’ll not really be covering the ins and outs of the MyRA, (if you’re looking for that, you can find it in my article for Personal Capital) but to look at the question of what is the role of the government in this situation.

A Look at the Numbers

Depending on who you talk to, they might say that there is a crisis when it comes to retirement preparedness. As an aside, I’m talking about what is viewed as the “traditional” retirement model where people work until somewhere in their mid 60’s and then stop working. In any event, here are some numbers in relation to retirement investing reported by the National Institute on Retirement Security (NIRS):

  • 45% of households, or 38 million households, have nothing saved for retirement
  • 44.5% million workers worked, as of 2011, for an employer that did not offer them access to a 401k plan for one reason or another
  • The median retirement account balance is $3,000 for working-age households and a robust $12,000 for those nearing retirement age
  • 92% of working households are missing their specific needed targets for retirement account balances. Translated into dollars that is a $6.8 Trillion to $14 Trillion gap. Yes, you read that right Trillion with a T

I’m generally not a doom and gloom type of individual, but these are rather grim numbers to look at. I wouldn’t imagine, on one level, that these numbers are right, but my experience tells me that they’re not far off. If in fact these numbers are right, then doesn’t it behoove us to change something? If so, at what level should that be and what role does the government play in it?

The Intent Behind the MyRA is Good

Looking at the intent behind the introduction of the MyRA by the Obama administration, it seems “good.” They want to give an avenue to those who have no access to a retirement package at their work to have one. Can we cede on that basis it has decent motives behind it? I believe we can. Just as a quick glimpse, this is what the MyRA proposes as according to WhiteHouse.gov:

  • It’s intended as a starter savings account
  • Individuals can start with as low of a contribution as $25 and as low as $5 per month after that
  • It allows people to put away up to $15,000 into a Roth IRA-like vehicle which protects contributions from loss
  • It acts much like TSPs offered to government employees and offers the same variable rate
  • The MyRA is portable and must be converted to a Roth IRA once it hits the $15,000 mark
  • You can make up to $129,000 per year as an individual or $191,000 as a household and still contribute

Beyond the nuts and bolts of the plan, there are a number of things I like about the MyRA:

  • It gives the option to those who may not have access to retirement vehicles through their employers a way to save
  • It helps raise awareness of the need to save money for retirement
  • It doesn’t expose individuals to too much risk as it’s backed by government bonds

In my opinion though, the benefits largely stop there and below the surface (and not that far below it either) lurks a bigger problem.

The Problem is that it Doesn’t Go Far Enough

The major problem I see with the MyRA is that it does not go near far enough in trying to stem the tide of the supposed retirement crisis. In fact, it seems as if the government wants to take a more active role in encouraging/requiring individuals save for retirement but not taking the final step needed to do so.

The major problem I see with the MyRA is that it’s not required to be offered by employers. So, if a version of this is passed, and you work for an employer that does not give you access to a 401k type plan you very well could be in the same situation the next day. Does this solve the problem of those not saving for retirement? In a word…no.

The other major problem I see with the MyRA is that its severely limited in scope. Of course, starting to save for retirement is a good thing. Putting money into something that is guaranteed not to lose principle value is also a generally good thing. However, is a $15,000 balance going to do much in terms of retirement preparedness? Try to put out a five alarm fire with a water gun and I think you’ll get your answer pretty quickly.

Underlying both of these glaring issues is the fact that it does nothing at all about the education issue. Speaking with investors first hand, I saw many who didn’t know where to start investing for retirement, believed they couldn’t start investing with little money or didn’t know what they should invest in. This, in my opinion, is the crux of the issue and something I wish the MyRA would address.

If we believe that the education aspect is important, or think it’s another issue, at what point does the government become compelled to help try and work to begin to“cure” it? Again, I’m not one for more government involvement per se, but when does it become a necessity at some level?

The Government Already Plays Somewhat of a Role

In looking at this issue of government involvement in our retirement planning I thought I’d take a look and see if this is uncharted territory for them. It’s quite easy to see that it’s not. The first major toe dipping into government intervention in our retirement investing is that the IRS does not allow true margin trading inside your IRA accounts. Some online brokerages allow for a modified version of it and it’s something I personally take advantage of, but true margin trading isn’t allowed by the IRS. The reason behind this is that margin trading involves borrowing in order to invest (in very basic terms) and the government essentially does not want us to borrow from our retirement assets, or at the very least they don’t want to encourage it.

The other major role the government takes in our retirement investing, that I’ll cover at least, is the Required Minimum Distribution that they require starting at 70 ½ years of age in Traditional (and the like) IRAs. I don’t necessarily take issue with this, but it is government interaction at a very basic level.

All this being said, there is some precedent for government involvement in our retirement investing activity but how far should that be taken?

What is the Underlying Problem?

While I believe employer participation should be made mandatory and other options given with the MyRA that is not truly the underlying problem in relation to the retirement “crisis” we’re seeing.

In my opinion, there are three major underlying problems in relation to the retirement problems we’re seeing. Those problems are, in no particular order:

  • Out of control spending by many
  • Lack of education, better stated lack of financial literacy
  • Out of whack priorities…which really points back to the first problem

In my completely non-scientific testing in my online brokerage days the number one reason given by the majority of people as to why they weren’t saving or saving more for retirement was debt. We talk about debt a lot in the PF blogosphere and I saw it each and every day. People were and are sacrificing their futures for a cushy present. Many would say they planned on changing, but few did over my time in the industry and the danger in that is one year becomes five and five becomes ten and so forth.

Time marches on and if we don’t make changes you’re going to wake up 15 or 20 years later seeing that you’re in the same spot. I don’t know about you, but I’d much rather make the painful changes now so I’m not robbing from my future self to the point my future self has to be a greeter at Wal-Mart. Trust me, you don’t want to see elderly me greeting people as they walk in to the third circle of hell…err I mean Wal-Mart…it won’t be pretty. ;-)

The other major underlying problem is a lack of education. I saw this every day in that many individuals lacked basic investing knowledge. This is not a criticism by any means, as I believe it points back to the issue of financial literacy not being addressed in our society.

That said, we can tell people to go pick up a book and invest in some index funds until we’re blue in the faces, but the fact is that will do very little in regards to education as many don’t even know what an index fund is or understand it when the basics behind it are explained. This issue calls for honest to goodness education so that individuals become empowered to the point they can make wise investment decisions that’ll benefit their futures.

Now that I’ve taken you through a 1,700 word post on the issue of saving for retirement and the government’s role in it I see that it’s not necessarily an easy answer, but one that does require serious thought. Looking at the numbers I discussed earlier, there is no doubt a problem and one that needs to be addressed. However, at what point does that bear forth a need for government intervention? While I hate on many levels to say it’s needed, I’m also practical enough to see that something does need to change. At what cost do we need to see this change, I don’t know.

 

What are your thoughts? Do you believe we need to see government intervention to encourage more to actively save for retirement? What would you do to encourage change?

 

Photo courtesy of: RCB

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and would love to help out if you have the need. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

53 Comments

  • MMD says:

    Great write up John! I agree that the MyRA is an okay start but falls very short of being effective. If people or even the government want to really get serious about retirement savings, there needs to be a whole more initiative taken.

    I see this as the first of many attempts to transition out of Social Security and into a more “privatized” style of saving. Lots of other countries already have accounts that are more pension-like in nature.

    It’s a shame too that all you can invest in are government bonds. At the rate things are going you’ll barely keep up with inflation.
    MMD recently posted…Niche Website Update 15 – A Slow Start for NS4 and $935 in Passive Income!My Profile

    • John says:

      Thanks MMD! I agree, it is well intentioned but falls way short in my opinion. Great point about the privatization issue. I think something like that could have potential if handled the right way.

      I agree, I wish they would open up the playbook a bit with it as I think it’ll likely lag inflation.

  • Kay says:

    The government already takes a very large role in providing incentives to save for retirement, the largest source being 401K and IRA tax deductibility. The myRA would be very small compared to any of these and is only allowing easy access to investing small amounts in treasuries. So I agree with the intent of the myRA to provide a savings vehicle for mostly those who do not have an employer sponsored plan, which I believe is close to 50% of the population.

    I agree with your assessment of the causes for under saving, those being largely over spending and lack of education. Do employers who provide plans have some responsibility for educating their workforce? It might help, but I do think there are many out there who think investing and saving is not for them because they don’t make enough money. It’s not true of course, but that’s probably the perception. The myRA looks to address that piece at least.
    Kay recently posted…What Are Investment Fees Really Costing You?My Profile

    • John says:

      You’re spot on with your assessment Kay. Many think they can’t because of what they make. Is it more difficult for some…sure it is, but it’s not impossible.

      In regards to employers educating their employees, many 401k plans already offer some sort of education, it just needs to be used.

  • I’m a libertarian so my answer is obvious: NO! Saving for retirement is something you should decide to do on your own. I think the bigger problem is financial literacy, as you pointed out.
    DC @ Young Adult Money recently posted…5 Steps to Turning Your Skills into MoneyMy Profile

    • John says:

      That’s the problem though DC, people aren’t doing it…which basically gets back to the financial literacy issue. As libertarian leaning as I am though, it’s not a cut and dry issue in my opinion.

  • Liz says:

    I believe the intent of the law is good. But like you mentioned, I’m not sure if it goes far enough. I’m not sure Americans should be “forced” to save, but I’m afraid that the alternative for people who chose to live somewhat irresponsibly before retirement end up relying heavily on the government later in life for things like welfare when they are too old and unable to work. I would rather require people to learn how to save than have them relying on the government to live. I think this could be a step in the right direction.
    Liz recently posted…My YOLO Weekend Starts TodayMy Profile

    • John says:

      “I would rather require people to learn how to save than have them relying on the government to live.” YES!!! Definitely a first step. :)

  • I hate it when the government comes up with almost any new plan because there always seem to be unintended consequences. Also, am I correct that people can only save an additional $15,000 in MyRA total? If so, what exactly is the point? People who don’t have access to a work-sponsored plan could’ve started nearly any kind of retirement plan on their own as it is, but they haven’t. What does that tell you? I am not impressed with this plan. =/
    Holly@ClubThrifty recently posted…Valuing Stocks and the Efficient Market HypothesisMy Profile

    • John says:

      Yep, you’re correct Holly! That’s also assuming this thing even gets passed, which I doubt highly. I think the plan has good intentions, but falls way too short in many areas and that’s not even beginning to touch the financial literacy issue.

  • I think you’ve hit the nail on the head. It’s all about a lack of priority for most. They live in the now and don’t care about 2 months from now let alone 20 years. The government can create all the savings plans they want, but it won’t matter until consumers realize that they need to make sacrifices today. It’s kind of ironic when you think about it – the economy is consumer driven, meaning we have to spend to keep the engine running, but we really need to be saving for our retirement. We have commercials and ads tricking us into spending now too too. To save for retirement, all we have are people saying how you have to do it. No one understands why they need to save for retirement until they are retired and have no money.
    Jon @ Money Smart Guides recently posted…The Ultimate Guide To Retiring EarlyMy Profile

    • John says:

      “…but it won’t matter until consumers realize that they need to make sacrifices today.” I could not agree more Jon. So many are only looking at tomorrow, next week, etc. and the time turns in to years. A change in thinking is needed first.

  • I’m not a fan of government interference, but in this case, I don’t think we can just stop at “the government is getting involved in retirement, what do you think?” It’s not that simple. What the gov is trying to do is head off a complete disaster in the future, when all these people who haven’t saved a cent for retirement can no longer work and have no source of income. And who gives out assistance to those with no income? Right – the government! So if they can encourage more people to save, and to save more, the idea seems to be that will translate into less people dependent on the government in the long run.

    That being said, I’m not arguing for the myRA plan – as you and many others have pointed out, it’s far from perfect and comes with a lot of flaws. I think a better solution would be to treat the cause, not the symptoms. We need a serious focus on financial literacy and education in this country. If more people understood personal finance, I would imagine they’d begin to save without government interference.
    Kali @ CommonSenseMillennial recently posted…True Life: Spending Money Hurts!My Profile

    • John says:

      I agree Kali. What you describe is the circular thinking that many can find themselves in and by trying to break that cycle by encouraging to save and doing it more is vital to breaking it.

      I love your point about treating the cause, I believe that is what is missing in all of this. While the intentions may be “good” they do nothing about why it’s actually going on.

  • John this is a great analysis and you highlight the biggest issue, the government is focusing on the wrong kind of intervention. It is pointless to force people to save for retirement, if they do not understand basic financial literacy and how to live a fiscally responsible life until they get to retirement. It doesn’t matter how much you have saved when you hit 60+, if you don’t know how to live within your means and live a financially healthy lifestyle, you are doomed for failure. The government needs to focus more of its efforts on financial literacy than retirement planning. If you live responsibly and make smart choices, you will be fine when it comes to retirement.
    Shannon @ Financially Blonde recently posted…Music Mondays – Girls Just Want to Have FunMy Profile

    • John says:

      “if you don’t know how to live within your means and live a financially healthy lifestyle, you are doomed for failure.” I could not agree more Shannon. That’s why so much of it goes back to the financial literacy issue you mentioned. You could be sitting on millions, but if you’re spending it left and right you won’t last long.

  • Grayson Bell says:

    I have always thought that the premise behind is was good. We have a saving problem. The issue is that the plan doesn’t really do much. All they did was provide a way for them to offload the bonds they have been buying up each and every month. It will give people a false sense of saving, when it really won’t put them anywhere.

    But, if it gets them to save, then can we complain?
    Grayson Bell recently posted…Home Staging Tips – The Key To A Great First ImpressionMy Profile

    • John says:

      I agree, the premise is good but it falls short in many ways. The saving aspect, while good, is far too limited in scope and not dealing with the real issue. Good point on the bonds, I had not thought about that at all.

  • The government has no business sticking their nose into our lives in this way. Big government is bad government. I’d much rather have control over my own contribution rate, and where the money is invested. The government can’t handle it’s own finances, what makes anyone think they can handle mine? :)
    Travis @debtchronicles recently posted…First Budget Post Debt Management Plan: How Did Our Spending Change?My Profile

    • John says:

      I definitely agree with your thoughts on big government Travis. However, something does need to be done…at least from the financial literacy standpoint to educate others why they need to save.

  • I am with you in that the biggest problem today is lack of education and priority. Most adults today had parents who worked for 30 years and got some sort of pension. You could almost still have lived paycheck to paycheck, although older generations were much better with debt, and still do OK in retirement. Now we are seeing the baby boomers hit retirement without pensions and having to live on social security only. As a result, they have to depend on other government entitlements to get by. It’s only going to get worse, as our generation has almost no pension eligible jobs and no one is saving, so maybe requiring that is a good idea, but I fear the rate required would be too low to make a difference. I can only hope our kids’ generation will learn from their parents mistakes and do better.
    Kim@Eyesonthedollar recently posted…Would You Sell Your House If It Meant Debt Freedom?My Profile

    • John says:

      I think you’re spot on Kim. I believe it’s only going to get worse as well, though I hope I’m wrong on that point. I’m hopeful that younger generations will learn from our stupid mistakes…there are signs of that in my opinion and we’re doing our best to make sure our kids know what to do. :)

  • It seems to me that the answer to just about every “epidemic” facing this country- lack of retirement funds, obesity, etc. all stems from a lack of education- not education in general, just education on those topics.
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  • Kathy says:

    As a conservative/libertarian/constitutionalist, I am very opposed to the government being involved in much of anything in my life. As a federal retiree, my husband was glad when he took his last distribution from this TSP because it meant no more government involvement. Every time the government reached its debt ceiling guess what got raided to fund operations until a new spending limit was set? You’re right! The government took money out of our TSP account to spend. Oh, they claim it was always paid back but IT WASN’T THEIR MONEY. If a thief stole your computer but then brought it back, would you be ok with that? This is simply another source of money the government can seize if they ever need to someday.

    Ok having said all of that, I am all in favor of any vehicle that gets people to save for their own retirement. Social Security will run out of money someday. Too many people rely on it solely for their retirement and we all know that it is not enough. I just wish that the mutual fund companies would lower their deposit requirement so people could begin with just $25 or $100 to start a plan. You can invest small amounts in bank CDs for an IRA but we all know how dismal those rates are. So I guess in answer to your original question, I wouldn’t mind a requirement to save for retirement beyond SS but I sure as heck don’t want the government to have any control over it whatsoever.

    • John says:

      That’s a good balanced look at it Kathy. I shudder to think of how it would feel, like you and your husband, to have your retirement funds raided because the powers that be couldn’t tighten the belts even just a little.

      I don’t know that I’d mind a requirement either, but like you, would not want the hands of the government in it.

  • Very tough question. It seems like when we’ve reached this point of needing the government to step in we’re to late. It makes more sense to me that we start teaching financial education a lot earlier so we don’t need programs like this. I think FE should be mandatory in schools.
    Tonya@Budget and the Beach recently posted…February Recap/March GoalsMy Profile

    • John says:

      I could not agree more on your last point Tonya. It needs to start as soon as realistically possible. Not only does it get the kids that way, but you never know what the parents will get out of it.

  • When I started my first job, I started investing in my 401k and opened an IRA plan. My dad taught me about investing and encouraged it. I was also interested in it. For the many people who started out with me who didn’t invest, but rather spent their earnings…I thought, well it’ll suck for them in the future. Too each their own and they’ll suffer the consequences. I’m not always a fan of government intervention, but something needs to be done. Because without some type of intervention, we’ll have a large amount of people living in poverty because they failed to take steps to save for the future.
    Andrew@LivingRichCheaply recently posted…Are We Overworked?My Profile

    • John says:

      I agree Andrew, something does need to be done and education is at the top of that list. Unfortunately, you’re in the small minority of starting as soon as you get your first job.

  • The best part of myRA’s is the fact that we’re discussing and realizing that there is a savings problem in this country. At some point something will have to give because social security only covers about 1/3 of retirees incomes.
    Michael Solari recently posted…The Age Old Question: Roth IRA or Traditional IRA?My Profile

    • John says:

      I could not agree more Michael! Hopefully this discussion will spur some actual action to get serious about educating the majority to get started investing.

  • AverageJoe says:

    Here’s my biggest question: do we really think the reason people don’t save for retirement is that there aren’t enough plans already available? I’m gonna bet “no.” I don’t think we need a new plan as much as we need education about how to use the existing plans.
    AverageJoe recently posted…How I Learned To Love Pie Without The ChartsMy Profile

  • Providing Financial Literacy is essential. Starting that off in middle school or high school would be ideal. I didn’t get a Personal Finance class until I was in college and it wasn’t a requirement rather an elective.
    Raquel@Practical Cents recently posted…2014 Goals: Progress ReportMy Profile

    • John says:

      I agree Raquel. I say even start as early as grade school, as is appropriate of course, in order to begin to set that solid foundation.

  • E.M. says:

    I agree that financial literacy really needs to be taken care of first. A 401k was not offered at my last job, which was really disappointing to me, but this doesn’t seem to be much of a solution if employers can opt out of it. I think a better solution would be for employers to at least offer some knowledge about opening an IRA in lieu of a 401k (which isn’t really their responsibility). Sad to say, but I wouldn’t have really known about it if I hadn’t been exposed to the PF world. My parents did not save enough for retirement (due to debt), and they are lucky they have a pension and social security to take advantage of. However, if these options were presented to us in high school/college, then many more would be aware of these retirement savings vehicles.
    E.M. recently posted…February Budget ReviewMy Profile

    • John says:

      I agree E.M., the education component is the biggie for me. The other one, you mentioned, was the ability to opt out on the employers part. If that’s on the table then how can this justifiably begin to solve the problem?

  • Mr. Utopia says:

    I share some of the same mixed sentiments about the MyRA plan. First, I’m not keen on the government meddling and getting involved in yet another aspect of our lives. That said, the Federal government is already involved via social security, medicare, etc. The burden of supporting the retirement aged generation will be there if they’ve got nothing to live on. So, in this case, I guess I don’t necessarily object (especially since there is no direct correlation to increased taxes!) to the intent of the MyRA plan. The problem is, the MyRA program is kind of a joke. It’s a horrible retirement planning vehicle especially for anyone who still has a long time until retirement. Then again, if it gets them saving at least something then I suppose it’s better than nothing.
    Mr. Utopia recently posted…Reduce Your Taxes Through Mental Power!My Profile

    • John says:

      Lol, that’s a great way to put it! I agree, on many levels, it is really a joke. While well-intentioned, it falls short on many levels. Though, I do agree it’s likely better than nothing.

  • Great post, John. I agree that intent behind the plan is good because we do need people to start saving for retirement. Too many are not and most just assume somehow it will turn out okay, which isn’t always true. I agree wholeheartedly with your underlying problems. It’s really become an epidemic in my mind and the worst part is so many people are oblivious to the danger right in front of them. I absolutely believe financial education needs to become a priority in schools and homes. So many people feel powerless because they think investing has to be difficult or you need to be uber rich to invest. Neither are true but it is a popular perception that prevents many people from taking action.
    Shannon @ The Heavy Purse recently posted…Creating Money Transparency in a RelationshipMy Profile

    • John says:

      Thanks Shannon! I could not agree more in regards to the feeling that many have in which they believe that investing is difficult. Sure, it takes work but is certainly surmountable.

  • Belle says:

    Good article! I worked for a nonprofit hospital for almost 7 yrs before I knew I could make contributions to a 403b plan. I have a defined pension plan, & my employer didn’t advertise the 403b account except to upper management until someone who knew finances realized that all employees @ nonprofit institutions could participate. I’m not uneducated, but I could have missed that opportunity by just not knowing. Now that I’m 57, I’m not missing those
    Maximum contributions, and will be retiring much sooner than a lot of my coworkers who made a lot more money , but didn’t jump on the 403b wagon! I started @ $25 every 2 wks, and increased with raises/ect. I’ve got almost 500k. You’ve got to start somewhere.

    • John says:

      Thanks Belle! What a shame, sorry to hear that. That said, it looks like you came out of it pretty well, especially considering retirement is coming sooner rather than later. :)

  • kathryn says:

    I will speak as a Canadian, as I don’t know if our systems are similar?
    My husband and I retired from employed work at 46 & 50 (4 years ago), so we do not receive any pension. We live very frugally on rental income.
    By the time we reach the government retirement age, where we are eligible for a government pension, I don’t expect to qualify. After working and paying taxes for 50+ years at that time, the pension amount will be lowered because they will take into account our assets and other income streams.
    Someone who spent all their pay cheque as fast as they received it , and more ( going into debt) will get the full pension and all available supplements. The same as someone who chose to live off welfare their entire lives.
    What do I think should happen? It’s not a simple answer.
    Starting now, all welfare should start out as a helping hand, and provide a good income. Every month, the payment is reduced, until it finally disappears. Yes, even if it is a single mother. She can either get a job, take in a room mate, share a babysitter, or take a live in position as a babysitter for another family, in exchange for room and board and a small wage.
    Governments are going broke trying to help everyone. Back in 1930’s families took care of their elderly. Houses were passed down from parents to children. people were more self sufficient.
    How many times have we heard, we need to break the cycle of poverty? Well, welfare is creating most of it. It encourages women to have babies without a job or a partner.
    Governments need to get tough. Put people in prison, and keep them there, when they break the law.
    Bring back the mental institutions. It keeps them off the street, and the public safe.
    No more allowing people to declare bankruptcy. They are required to make payments until it is paid, even if it takes a lifetime. Time to start taking responsibility for your decisions. Everyone who isn’t getting paid, is having a hard time paying their bills. make it easier to collect from these people.
    Stop allowing people to sue over stupid things. You burn yourself with coffee while driving through McDonald’s…well , maybe you shouldn’t be drinking and driving.
    What would people do if there wasn’t any welfare or pensions? You’d start preparing, just like they did generations ago. They worked as maids,nannies,etc. They lived in boarding houses.They mend their clothes.They reduce, reuse, recycle.
    If people still decide they can’t be bothered? Bring back a poor house equivalent. They get dormatory style accommodation and meals. If they can’t follow the rules, they are evicted, and will probably end up in prison.
    Working for minimum wage is also not an excuse to save either. Lower your expectations. There always seems to be an excuse why they can’t.
    Sorry. I am tired of paying for generations of people thinking they are entitled to be kept for their entire lives, while others work and struggle, become frugal, to survive.

    • John says:

      Well, I don’t know which of the topics to cover first in your comment Kathryn. :) That said, I think your last statement is spot on and one that many would agree with. Some things do need to change, that’s for certain.

  • In Australia, the government forces individuals to self-fund their retirement through superannuation, similar to RAs.

    It’s great to have the enforced saving from the moment you get a job, but most people never take control over their accounts and how much their investing, so many fall short during retirement.

    A really big problem I have with it though is – I pay taxes and I try to fund my own retirement through working on it diligently, however my taxes end up funding someone else’s retirement in the long run through social security benefits, which I will never be able to access, simply because I tried to do the right thing and pay for my own retirement.

    Long story short, I think it’s a good idea.
    Mr Ikonz @ Project Ikonz recently posted…Retirement financial advice – don’t ask your mateMy Profile

  • Well written John. I don’t like much government intervention, so I think it should be up to the individuals to save for retirement. Although I really dislike funding the retirement of others. In my opinion, it seems as though there are already plenty of incentives to save for the future. If they really wanted to make a change, why not increase the scope of the Roth IRA? But like you said, it all goes back to financial literacy. I would be much happier with mandated financial education courses in high school than with this.
    Ryan @ Impersonal Finance recently posted…travel is historically cheap, but you can still save on itMy Profile

    • John says:

      Thanks Ryan! You bring up some good points, all of which point back to the hard balance with this but I agree that financial literacy education in schools is a vital part of the long term solution.

  • I’m a proponent of government intervention to improve retirement savings rates, for two main reasons: one, it serves the public good so there is justification for their involvement and, two, financial literacy education does not work. The evidence is clear and damning on the latter point. Teaching citizens about the merits of compound interest or the basics of how an IRA/401k work doesn’t do anything to change behavior; students in financial literacy classes are no better off for having taken the course.

    Given the dire need and the inefficiency of ‘hands off’ approaches, I am in favor of mandatory contributions into IRAs or 401ks.

    As for the MyRA program itself, it’s a dud.
    Done by Forty recently posted…Relative CostsMy Profile

    • John says:

      I agree with your point on the public good DB40. It helps towards that end on various levels. I do beg to differ though on financial literacy education not working. The problem is that it’s not being offered at all period. So, how can we say it doesn’t work?

      A lot of it is behavior based, I definitely cede that, but a lot of it is also plain ignorance. I saw it every day when I spoke with investors. They had the money, but did nothing with it because they honest to goodness did not know what to do in regards to investing. Yes, financial literacy education may not necessarily get to the root of the behavior, but it will with the ignorance and thus help the many that simply have no clue what they’re doing.

      In regards to the MyRA program, spot on!

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