Little more is known about the program, and while the advantages of investing as little as $25 will create opportunities in low-income households, there are also many disadvantages. Although the initial investment is guaranteed, the money is being funneled into low-yield Treasury securities. These investments will not grow into enough money to fund anyone’s retirement. In order to truly benefit from the program, an investor will have to accumulate enough to roll into a regular IRA, which doesn’t happen until you reach $15,000.
People will be allowed to invest as much as $5,500 per year, but most poor and middle-income families just do not have that much to put aside.
Another concern is whether the myRA will be stocked with inflation-adjusted bonds such as I Bonds or Treasury Inflation Protected Securities, or TIPS. These investments are already available tax-free from the U.S. Treasury, and one of the largest TIPS funds lost 8 percent last year.
Can you already see the problem with this? Not to mention that the current composite rate for I Bonds is 1.38 percent.
Obama should not be concerned with creating a new system that many low-income people will not even be able to take advantage of. People can save more money when they’re paying less in taxes. The average American needs a more defined benefit package. One of the reasons pension systems became so popular was because the average person did not have to manage one.
In reality, the president is trying to use the savings of the working class to buy U.S. Treasury bonds and pay for the U.S. debt — the same debt that has increased by approximately 57 percent since he took office.
The administration has become desperate. Instead of cutting back big-government spending programs such as Obamacare, the president would rather try this government-sponsored pension system. He should be more focused on adding jobs and boosting the economy so people can work, earn a paycheck and begin to save. On Long Island, the unemployment rate has fallen to just 5.1 percent. Obama should take a page from the Mangano playbook.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.