Re: MyRA
Posted: Thu Nov 05, 2015 5:28 pm
This is why I like fiscal policy rather than monetary as a cure to recessions. People just HATE saving and getting nothing for it (even if the idea of earning risk-free return is a false one). You have to create artificial behavioral triggers to help people with this. It'd be great if human beings worked differently. They do not. If you want to make a program work, you gotta meet people where they are, not where you want them to be (and, if they were there, you wouldn't need to meet them to begin with, because they'd already have saved enough).WiseOne wrote: I kind of like this idea actually. It looks like it's intended to teach people how to save, getting them started with some good budgetary habits. So many people cannot get their heads wrapped around the idea of setting aside a bit of money every month for savings.
I did something like this for my brother, who was constantly talking about how he just couldn't save for this or that reason. I opened a 529 account when his daughter was born, started a small monthly contribution and told him I'd keep it up if he could match it. He was all tied up in knots about it until I told him he could always cancel a monthly payment if he was running short (he's self-employed). He doubled my contribution and has now proudly kept it up for 3 years. When his son was born I doubled my contribution and he did the same. He loves how the money is piling up and voila, a new habit has taken hold. Yay.
And if we ARE going to have federal programs to help with retirement, I'm mostly convinced that having a simple program that is SS-like is the right answer. Some people just can NOT handle having tens-to-thousands of dollars worth of purchasing power available to them all at one time. I'd prefer, in 2015, to not have these flawed people starving in the streets. This MyRA program pretends that the problem is banks or fees, rather than simply flawed human behavior around having vasts sums of money at one's disposal. What they don't realize is that "retirement" is a remarkably new concept in civilization, and during most of it, the vast majority of people's non-SS incomes were built on these things called "pensions," where you really couldn't overspend much even if you wanted to.
But now we don't have those, and interest rates are incredibly low, so people have to build up a $1 million portfolio to create $40k per year of spending money. Human beings are probably simply NOT very often wired to build up such a rich benefit.
And even if someone has saved enough for retirement, they’re given a few different tax environment options, and what seems like a billion investment options with varying risks and fees and monte-carlos for success in retirement, and they’re left completely paralyzed as far as what to do. Giving them a 2% option that only allows $15,000 of assets is not going to cure that… it’s only going to serve to confuse even more.
We are simply NOT designed as human beings to handle retirement correctly without a large part of it being made up by something pension-like. If the government should offer anything, it would be a SS add-on that gives you pension credits at a relatively modest rate of accumulation and distribution. Like 401(k)’s, we would all automatically be enrolled upon employment and would have to opt out.
Further, perhaps there should be an option with our credit bureaus to sign up for a 5-year freeze on any new credit. As in, if someone pulls the trigger on this program, they opt into a period of time where no financial institution is allowed to offer them a loan for any reason but medical. This would allow people to, in their highest point of financial clarity, eliminate the temptation of easy money. I think this would have a tremendous effect on people’s ability to accumulate wealth, as they’d be cutting out their greatest toxic expense.
