Tuesday, March 31, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

President’s MyRA idea plan inadequate

By
From page C2 | March 30, 2014 |

Since the announcement by President Barack Obama of the MyRA idea as a retirement tool, many criticisms have arisen. Here is a brief summary of the most-relevant points.

Before saving for retirement or doing any investing, every person should have an emergency fund. This amount could range from expenses for a few months to six months. Only after fully funding this amount should anyone consider investing, especially in a retirement account.

Much has been made of the alleged “safety” of MyRAs. Unfortunately, this statement represents the height of financial illiteracy. Even if the account is essentially a series of quality bonds, the most you can say is that the principal is safe. But remember, as with all bond investments, there is the risk of lost purchasing power due to inflation.

One relevant observation is that MyRA is only a political move since Roth IRAs are much better for individuals to use. It is being done in a way that makes individuals “feel” better but the reality is that this type of account will most likely not earn enough interest to beat inflation.

Although the details of MyRA are not yet clear, it appears the total contribution allowed to this plan is $15,000. This amount is simply not enough to be meaningful for anyone during retirement.

Other retirement account types are superior both in terms of investments available and the amount eligible to contribute. Anyone with access to a 401(k) plan with an employer match should start there. Take advantage of this employee benefit. Lower-income taxpayers that don’t have access to an employer-sponsored 401(k) plan are better served with a Roth IRA.

This is not tax deductible; however, if the account is open for at least five years and you are over age 59 ½, then all of the distributions are free of income tax. Middle-income taxpayers may be better served with a regular IRA. Contribute on a tax-deferred basis. Distributions would be taxable. Simply sign up to have these funds withdrawn from your checking account monthly.

You need to consider a broader range of investments than MyRA provides. Most mutual fund companies offer IRA programs with many choices and the chance to contribute small amounts with little administrative cost.

The bonds suggested as an investment are a poor choice, especially when U.S. bonds are paying such paltry interest. Ironically, no more than week prior to the announcement of the MyRA, a study showed retirement investors are too conservative and invest too heavily in bonds, notoriously bad long-term investments.

The government guarantee may be misleading. Saving something is better than nothing, but people don’t need to save. They need to invest. Investments earn a real return, a rate above inflation. Anything with a government guarantee is sure to give you a rate of return that will not only be low, but it will be negative after taking inflation into account.

Emphasizing tax savings for low-income citizens misses the point. If someone doesn’t have $1,000 to open a Roth IRA, then they’re unlikely be paying taxes. A simple brokerage or bank account would almost serve the same tax benefits as a Roth IRA.

Matching funds from an employer as part of a 401(k) plan are a powerful advantage. This should be the first choice. Next would be a Roth IRA or a general investment account that invests in a tax-conscious way.

Will the government really keep its financial promises or is this just another way for them to gain access to more money? The government has not actually invested the funds kept for Social Security benefits. Why will this program be different? The issue of saving for retirement is very important but this approach is inadequate.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from the University of California, Berkeley. Contact him at [email protected]

LEAVE A COMMENT

Discussion | 1 comment

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Mr. PracticalMarch 30, 2014 - 6:57 am

    Like ObamaCare, MyRA's was a poorly communicated attempt to gain votes. Anyone with insurance experience or a solid understanding of free enterprise, knew ObamaCare was unworkable. Anyone with financial planning experience knows MyRA's are not the answer.

    Reply | Report abusive comment
.

Solano News

2 drivers killed in same area, an hour apart

By Amy Maginnis-Honey | From Page: A1, 20 Comments

 
Easter activities, events abundant

By Susan Hiland | From Page: A1 | Gallery

Christians begin Holy Week with Palm Sunday celebrations

By Amy Maginnis-Honey | From Page: A1, 1 Comment | Gallery

 
My guide to dining out

By Tony Wade | From Page: A2, 5 Comments

Local governments post week’s meeting times

By Susan Hiland | From Page: A3

 
Top young spellers to compete for Solano title

By Glen Faison | From Page: A3

Police investigate shooting off North Texas Street

By Amy Maginnis-Honey | From Page: A3, 12 Comments | Gallery

 
Vallejo police seek leads in weekend homicide

By Amy Maginnis-Honey | From Page: A3

Biz Buzz: Wiseman officer names Perez to key post

By Kevin W. Green | From Page: A10

 
Biz Buzz: Re/Max hires new Realtor

By Susan Hiland | From Page: A10

Biz Buzz: PAL receives donation from glass company

By Susan Hiland | From Page: A10 | Gallery

 
.

US / World

 
Analysis finds unequal pay for women on California Capitol

By The Associated Press | From Page: A3

Songwriter injured in California crash; motorcyclist killed

By The Associated Press | From Page: A3

 
Taylor Swift wins artist of the year at iHeartRadio Awards

By The Associated Press | From Page: A4

Court ruling opens door for federal execution of murderer

By The Associated Press | From Page: A4

 
 
Police: 2 bodies found in NYC building explosion rubble

By The Associated Press | From Page: A5

 
Waving fronds around the world, Christians mark Palm Sunday

By The Associated Press | From Page: A7

 
Small tsunami generated in Pacific after earthquake

By The Associated Press | From Page: A9

.

Living

Community Calendar: March 30, 2015

By Susan Hiland | From Page: A2

 
Today in History: March 30, 2015

By The Associated Press | From Page: A2

Horoscopes: March 30, 2015

By Holiday Mathis | From Page: B6

 
Parenting: If a father is abusive, a mother must act

By The Washington Post | From Page: B8

 
Horoscopes: March 31, 2015

By Holiday Mathis | From Page: B8

.

Entertainment

TVGrid March 30

By Daily Republic Syndicated Content | From Page: A10

 
TVGrid March 31

By Daily Republic Syndicated Content | From Page: A11

Michelle Obama declares ‘Black Girls Rock!’

By The Associated Press | From Page: A11, 4 Comments

 
.

Sports

 
Spartans Final Four-bound after 76-70 OT win over Louisville

By The Associated Press | From Page: B1

Duke back in Final Four after 66-52 win over Gonzaga

By The Associated Press | From Page: B1

 
Apology for wrong anthem for El Salvador before game in US

By The Associated Press | From Page: B2

Montoya holds off Power to give Penske 1-2 sweep at St. Pete

By The Associated Press | From Page: B2

 
Stanford’s Randle chases school scoring record, title at NIT

By The Associated Press | From Page: B2

Hamlin wins for 25th time, and fifth time at Martinsville

By The Associated Press | From Page: B2

 
Hamlin wins for 25th time, and fifth time at Martinsville

By The Associated Press | From Page: B2

Jimmy Walker wins hometown Texas Open

By The Associated Press | From Page: B2

 
Oakland OF Josh Reddick won’t be ready for start of season

By The Associated Press | From Page: B2

California Chrome heads to Britain, to race at Royal Ascot

By The Associated Press | From Page: B2

 
Vettel wins Malaysian GP to end Mercedes streak

By The Associated Press | From Page: B2

Joe Gibbs on son: most courageous person I’ve been around

By The Associated Press | From Page: B2

 
Chodounsky defends slalom title at US Alpine Championships

By The Associated Press | From Page: B2

South Carolina earns 1st Final Four berth, beats FSU 80-74

By The Associated Press | From Page: B2

 
Turner says Saturday regional finals highest-rated in decade

By The Associated Press | From Page: B2

Graveman pitches into 7th inning as A’s beat Brewers 7-0

By The Associated Press | From Page: B3

 
Cain goes 4 innings in Giants win over LA

By The Associated Press | From Page: B3

.

Business

.

Obituaries

Robert Roberts

By Nancy Green | From Page: A4

 
Janice Jewel Thompson

By Nancy Green | From Page: A4

.

Comics

B.C. March 30

By Daily Republic Syndicated Content | From Page: B5

 
Wizard of Id March 30

By Daily Republic Syndicated Content | From Page: B5

Beetle Bailey March 30

By Daily Republic Syndicated Content | From Page: B5

 
Rose is Rose March 30

By Daily Republic Syndicated Content | From Page: B5

Peanuts March 30

By Daily Republic Syndicated Content | From Page: B5

 
Zits March 30

By Daily Republic Syndicated Content | From Page: B5

Blondie March 30

By Daily Republic Syndicated Content | From Page: B5

 
Pickles March 30

By Daily Republic Syndicated Content | From Page: B5

Get Fuzzy March 30

By Daily Republic Syndicated Content | From Page: B5

 
Sally Forth March 30

By Daily Republic Syndicated Content | From Page: B5

For Better or Worse March 30

By Daily Republic Syndicated Content | From Page: B5

 
Baldo March 30

By Daily Republic Syndicated Content | From Page: B5

Garfield March 30

By Daily Republic Syndicated Content | From Page: B5

 
Dilbert March 30

By Daily Republic Syndicated Content | From Page: B5

Baby Blues March 30

By Daily Republic Syndicated Content | From Page: B5

 
Frank and Ernest March 30

By Daily Republic Syndicated Content | From Page: B5

Sudoku March 30

By Daily Republic Syndicated Content | From Page: B6

 
Bridge March 30

By Daily Republic Syndicated Content | From Page: B6

Word Sleuth March 30

By Daily Republic Syndicated Content | From Page: B6

 
Crossword March 30

By Daily Republic Syndicated Content | From Page: B6

Cryptoquote March 30

By Daily Republic Syndicated Content | From Page: B6

 
Wizard of Id March 31

By Daily Republic Syndicated Content | From Page: B7

Baby Blues March 31

By Daily Republic Syndicated Content | From Page: B7

 
Frank and Ernest March 31

By Daily Republic Syndicated Content | From Page: B7

B.C. March 31

By Daily Republic Syndicated Content | From Page: B7

 
Blondie March 31

By Daily Republic Syndicated Content | From Page: B7

Peanuts March 31

By Daily Republic Syndicated Content | From Page: B7

 
Baldo March 31

By Daily Republic Syndicated Content | From Page: B7

Rose is Rose March 31

By Daily Republic Syndicated Content | From Page: B7

 
Beetle Bailey March 31

By Daily Republic Syndicated Content | From Page: B7

For Better or Worse March 31

By Daily Republic Syndicated Content | From Page: B7

 
Dilbert March 31

By Daily Republic Syndicated Content | From Page: B7

Garfield March 31

By Daily Republic Syndicated Content | From Page: B7

 
Pickles March 31

By Daily Republic Syndicated Content | From Page: B7

Zits March 31

By Daily Republic Syndicated Content | From Page: B7

 
Sally Forth March 31

By Daily Republic Syndicated Content | From Page: B7

Get Fuzzy March 31

By Daily Republic Syndicated Content | From Page: B7

 
Crossword March 31

By Daily Republic Syndicated Content | From Page: B8

Word Sleuth March 31

By Daily Republic Syndicated Content | From Page: B8

 
Bridge March 31

By Daily Republic Syndicated Content | From Page: B8

Sudoku March 31

By Daily Republic Syndicated Content | From Page: B8

 
Cryptoquote March 31

By Daily Republic Syndicated Content | From Page: B8