Personally I have mixed thoughts about the myRA, which is apparently a more positive stance than the vocal majority out of the financial industry. The pros/cons of myRA are quite transparent.
On paper, the myRA program just makes great sense to me. The White House released the first Fact Sheet on the accounts this week. The most obvious point of contention from the financial industry is the forced investments into Treasury securities, but I have no issue with that restriction. It prevents myRA investments from higher risk equities as to not discourage novice investors by starting off on the wrong foot, e.g. buying at the peak of the market, or by fostering more distrust where participants could have less in their myRA after putting money into it.
The problem is that most dissenters from the investment industry cannot turn off their own minds and view things from the mindset of a non-investor. Professionals know what is best to prepare for retirement, because they know how the business works, but the problem is that large percent of the population who do not know how investments work or, even worse, where to start. This investment is exclusively for their benefit.
Fortunately, I am in a rare situation where I spent 10 years in the financial industry, and then spent the past three years under-employed while I tried to start a new career in the legal field. Having a couple jobs making less than the proposed minimum wage during that time enables me to appreciate things like this myRA proposal differently. I did not have access to a 401(k) in my past two jobs. In my case, I opted to hold off on retirement contributions because I was still pulling money out of my investments for living expenses, but my experience was a temporary situation with a visible end in sight. If this opportunity existed, I most likely would have put $5 (or more, knowing me) to this type of retirement account just to continue active contributions to my retirement.
Obviously, I could have set money aside each paycheck to contribute into my Roth IRA once the accumulated balance reached the minimum additional investment amounts, but the reality is that I did not think to do so because it was not a visible option. Therein lies the problem: saving for retirement, outside of employer retirement plans, must be a priority. Conversely, myRA investing should capture participation rates that exceed individual retirement plans and inch closer to the participation rates that employer retirement plans have.
My initial concern on the myRA project is how it seems the more popular myRAs are, the more expensive the program will become. Won't the accounting of these millions of myRAs at balances under $100 be a tremendous expense? There is a valid reason why the finance industry has set minimum initial investment amounts. Unless they are waiving the accounting requirements to give them an advantage over what the financial industry can offer, I do not understand why the reporting expenses would be lower for a myRA than for the current IRA options.
That said, the pros and cons of any situation are not mutually exclusive, but considering them separately is necessary to move toward a conclusion. And just like investing, personal emotion holds the least amount of weight. The dissent from investment professionals is valid, but they should consider those concerns on par with clients who delay investing because of their own personal emotion; in each case, it is best to think of personal opinions as an obstacle and not a valid reason for dismissal.
For additional information available on the proposed myRA program, please visit http://www.whitehouse.gov/blog/2014/02/11/myra-helping-millions-americans-save-retirement
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