ClydeR
07-08-2009, 11:00 AM
I have mixed feelings about this. I am especially concerned about how Obama "tucked" this reform into the bill, instead putting it in there the normal way. Also, I don't think it's a good idea for the government to decide what everybody should invest in. Apparently, it will be a one-size-fits-all plan -- build up a small cash fund, then put the rest into a target-date fund invested in debt instruments.
Such an investment is better than no investment, but I wonder if the government should be in the business of making that decision for everybody. If I want to spend everything I earn, what business does the government have telling me to do otherwise? The best way to get people to save would be to eliminate the dole for poor old people. If workers know there will be no dole, then they will save for themselves.
Tucked into President Obama's financial regulatory reform legislation still being debated in Congress is a proposal to get more workers saving for retirement. The plan calls for employers to set up mandatory automatic-enrollment IRAs, retirement accounts that allow for tax-deductible contributions.
If the measure passes, companies that don't currently offer a tax-deferred retirement-savings plan would funnel employee contributions into IRA accounts through direct payroll deposits. It would also represent the biggest increase in new retirement savers since the creation of the 401(k) in 1980.
More... (http://online.wsj.com/article/SB124698771970906941.html)
The model's roots are in the science of behavioral finance, a field whose findings routinely suggest that people tend to put off doing what they know they should do. For example, rather than choosing a retirement fund from the myriad options available – a daunting task – many people do nothing. They become victims of their own inertia and ultimately come up short when they retire.
Early estimates predict that the plan could direct roughly $100 billion into IRAs over five years and give some of the 75 million workers who don't have access to an employer plan....
The default IRA portfolio would likely include a basket of conservative holdings. Those assets include I bonds (inflation-indexed savings bonds), money-market mutual funds or stable value funds, John says. "The goal here is to build up a certain amount, say $3,000 to $5,000," he says, at which point the account would automatically roll over and new contributions would go into a target-date fund, a popular 401(k) investment option. Workers would retain control over their accounts, but the plan would make adjustments over time -- even if the workers did nothing.
Initially, the IRA mandate would affect only firms with more than 10 employees.... Later, once the details are ironed out and businesses and officials watch the plan underway, the threshold could be lowered.
Such an investment is better than no investment, but I wonder if the government should be in the business of making that decision for everybody. If I want to spend everything I earn, what business does the government have telling me to do otherwise? The best way to get people to save would be to eliminate the dole for poor old people. If workers know there will be no dole, then they will save for themselves.
Tucked into President Obama's financial regulatory reform legislation still being debated in Congress is a proposal to get more workers saving for retirement. The plan calls for employers to set up mandatory automatic-enrollment IRAs, retirement accounts that allow for tax-deductible contributions.
If the measure passes, companies that don't currently offer a tax-deferred retirement-savings plan would funnel employee contributions into IRA accounts through direct payroll deposits. It would also represent the biggest increase in new retirement savers since the creation of the 401(k) in 1980.
More... (http://online.wsj.com/article/SB124698771970906941.html)
The model's roots are in the science of behavioral finance, a field whose findings routinely suggest that people tend to put off doing what they know they should do. For example, rather than choosing a retirement fund from the myriad options available – a daunting task – many people do nothing. They become victims of their own inertia and ultimately come up short when they retire.
Early estimates predict that the plan could direct roughly $100 billion into IRAs over five years and give some of the 75 million workers who don't have access to an employer plan....
The default IRA portfolio would likely include a basket of conservative holdings. Those assets include I bonds (inflation-indexed savings bonds), money-market mutual funds or stable value funds, John says. "The goal here is to build up a certain amount, say $3,000 to $5,000," he says, at which point the account would automatically roll over and new contributions would go into a target-date fund, a popular 401(k) investment option. Workers would retain control over their accounts, but the plan would make adjustments over time -- even if the workers did nothing.
Initially, the IRA mandate would affect only firms with more than 10 employees.... Later, once the details are ironed out and businesses and officials watch the plan underway, the threshold could be lowered.