02-05-2013, 09:31 AM
Gen Univ Roleplaying Sys
Member Since: Nov 2012
from Money and Markets ....
Dear Subscriber, |
Washington's hubris never ceases to amaze me. For whatever reason, lawmakers always think they're better decision makers than the typical citizen — despite so much evidence to the contrary.
Take the subject of retirement planning.
As I point out in my just-updated video — The Death of Social Security — politicians have already run our nation's current retirement system into the ground.
Yet rather than worrying about the mess they've made, they are talking about creating MORE government-mandated retirement systems!
One of those is the "Automatic IRA."
The idea comes from David John of the Heritage Foundation. He unveiled it back in 2006, and it has since been proposed to Congress a number of times:
In the Senate, the latest iteration was introduced by Democratic Senators John Kerry and Jeff Bingaman in September 2011 ...
In the House, Democratic Representative Richard Neal (Mass.) most recently proposed it in February 2012 ...
And most notably, President Obama endorsed the idea in his budget for fiscal 2013.
The basic gist is that businesses with 10 or more employees would be required to start funding a new form of individual retirement account. While businesses that already have retirement plans would be exempt, it's estimated the legislation would affect about 40 percent of the U.S. workforce.
Employees would be automatically enrolled, though they could then choose to opt out.
What kind of investment choices would be offered?
That's not clear yet, though Mr. John — the initial creator — has said:
"There could be an R-Bond account at Treasury for first-time savers, but that money would be rolled into private sector accounts once the individual accounts reached a certain size."
Translation: The Default Option Might Be U.S. Treasuries!
Just think about it: This idea could amount to automatically taking money from 40 percent of the American workforce and putting it into U.S. debt ... at a time when Washington's deficits are ballooning out of control and other investors are growing less interested in buying our bonds.
Is that a mere coincidence? I don't think so.
Because, sure, you could opt out. And you might easily change the type of investment in your new Automatic IRA, too.
et the very reason lawmakers are pushing for these accounts in the first place is because they say most people don't take intentional actions. So by that same logic, a whole lot of people would just be herded into investing more of their earnings in spendthrift politicians!
Even if this plan really does start with the best of intentions — encouraging more Americans to start saving more for their retirements — I believe additional tax breaks or other incentives would be a far better way to accomplish the goal.
After all, look what's happened every other time lawmakers have tried to "help" Americans manage their retirements:
We've seen just how quickly politicians have drained our existing national retirement program ...
We've watched elected officials walk away with six-figure pensions while their constituents suffer ...
And even with systems that are truly segregated for the good of beneficiaries — like state pensions — there have been plenty of examples of mismanagement and broken promises.
So are Automatic IRAs the worst idea Washington can come up with? Not by a long shot.
But it sure would be better if they worried about the messes they've already created rather than new ways to protect everyday citizens from themselves.
huh ? Automatic IRA?
| Pursuing Universal Retirement Security Through Automatic IRAs and Account Simplification |
The Committee on Ways and Means
United States House of Representatives
I am David C. John, the Senior Research Fellow for Retirement Security and Financial Institutions at The Heritage Foundation. In addition, I am also the Deputy Director of the Retirement Security Project (RSP). The views I express in this testimony are my own, and should not be construed as representing any official position of The Heritage Foundation or RSP.
Chairman Camp and Ranking Member Levin, I appreciate the opportunity to testify before you on ways to increase retirement savings opportunities for all Americans. With the continued decline in the number of Americans covered by employer sponsored defined benefit plans, millions of individuals whose employers don’t offer any way for them to save for retirement at work, and Social Security’s continued financial problems, it is crucial that the Congress develops a common strategy to expand retirement savings in a manner that transcends ideological and partisan differences.
In 2006, a bipartisan majority in Congress eliminated barriers to the use of automatic enrollment and similar automatic techniques in retirement savings plans with the result that millions more Americans are both saving and building retirement security. The results have been stunningly good. With automatic features, enrollment in 401(k)-type accounts has grown to average over 80 percent of eligible employees. In addition, every major income, age, racial or ethnic, and gender has shown an increase in participation rates.
However, the job is not complete. As I will discuss in a moment, there are still millions who do not have access to a payroll deduction retirement savings account, the best and most effective way to build a retirement nest egg. It is true that these workers could save in an IRA, but studies show that only about 5 percent to at most 10 percent of those workers who have access only to a non-payroll deduction IRA actually have such an account and make regular contributions to it.
| Pursuing Universal Retirement Security Through Automatic IRAs |
Roughly half of all working Americans work for employers that offer no retirement plan. Thus about 78 million workers have no way to save on the job for the day when they stop collecting a paycheck. This circumstance, combined with a national saving rate that has been declining steadily for most of the past twenty years and the unlikelihood that Social Security will be able to provide increased benefits, makes inadequate retirement saving a major national problem.
This paper spells out an ambitious yet practical set of initiatives to expand retirement saving dramatically. We propose making saving automatic - and hence easier, more convenient, and more likely. This strategy has been shown to be remarkably effective at boosting participation in workplace-based 401(k) retirement savings. We would extend this strategy to most employees who have no access to 401(k) plans by combining several key elements of our current system: payroll-deposit saving; automatic enrollment; low-cost, diversified default investments; and individual retirement accounts (IRAs).
I also stumbled across a like the AARP is for this as well ..........
I didn't say it was your fault, I said I was blaming you.
I'm only responsible for what I say...not what you think you understand.
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