There are several major flaws in myRA, the new government retirement-savings program, Wall Street Journal
— short for “my Retirement Account”— was announced by President Barack Obama in his State of the Union address last January and is designed to be a starter account for workers who aren’t covered by a workplace retirement plan.
Signups began within the last month and the Treasury Department has launched a pilot program with a small group of employers, including the U.S. Office of Personnel Management, that are offering the myRA to their employees.
But the Journal notes that the program wasn't even approved by Congress. "President Obama said that he would direct the Treasury to create this new retirement plan, which was puzzling because such plans are normally created by law, not presidential order," the editorial states.
Second, the plan invests only in Treasurys. "Any financial professional who advised a young investor to avoid stocks and corporate bonds — and everything else except Treasury bonds — would be sued for malpractice," the editors write.
Third, investment fees are subsidized by the government. "Taxpayers are covering the costs, though their elected representatives in Congress never voted to create the program," the editorial notes.
"The subsidies in myRAs are likely to be small at first, but the history of government programs is that they expand over time. And if such a subsidy scheme can be enacted administratively, does anyone think this will be the last time such power is exercised?"
Meanwhile, if you're planning on retiring in the next year, Emily Brandon, senior retirement editor at U.S. News & World Report
, offers several tips.
- Decide when to begin taking Social Security benefits. In general, the longer you wait, the greater your payouts are.
- Make sure to sign up for Medicare as soon as you're eligible. "You should start submitting the paperwork for Medicare up to three months before age 65," Christopher Rhim, a certified financial planner for Green View Advisors in Norwich, Vt., tells Brandon. "There are some financial penalties if you sign up later."
- Consider rolling over your 401(k) into your IRA. Doing so may save you on fees and give you more investment choices.
- Pay attention to required minimum distributions for IRAs after age 70 1/2.
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