MyRA should be MyAnnuity
President Obama unveiled the MyRA idea at his recent State of The Union address and signaled the government’s efforts to redefine “retirement fairness.”
The MyRA is supposed to help those U.S. workers whose employers don’t offer traditional retirement accounts, like 401(k)s, to save for retirement.
In true Washington fashion, they totally missed the mark on what all Americans really want. What every single voter on the planet desires, regardless of party affiliation, is an adequate income stream that they can never outlive — not a savings account.
If you doubt that, think back to the last time any politician even hinted about altering the sacred cow of all lifetime income streams, Social Security. The majority of boomers and senior citizens (aka, voters) will have none of that kind of political talk.
The question is, was it a planned communication mistake, or just another example of Washington not having a clue about what the majority of Americans really care about?
Conspiracy theorists unite
From the moment that President Obama stumbled over the pronunciation of “MyRA,” the black helicopter crowd had already grabbed their fire sticks and were congregating in the streets planning their next move. Who knows, this might be the first step in the feared confiscation of the trillions in personal retirement plans. I seriously doubt that is the case, but “retirement fairness” plans like Tom Harkin’s do make your stomach hurt a little if you’ve been a diligent and disciplined saver and aren’t keen on subsidizing others retirement needs.
The patriotic salami game
My theory on the whole MyRA thought is the old “salami game,” described as slicing off small pieces until a significant amount is gone. That’s what I think the MyRA strategy is all about.
For example, Washington says that they have no intention of confiscating your IRA, but I believe that they may start “encouraging” every “patriotic” American to place 3% of their IRA total in U.S. Treasurys. Sure, this program is currently targeted for the nearly half of U.S. workers with no employer retirement plan, but how long before they roll it out to everyone? How long before it becomes mandatory? Then in a few years, they move it to 5%, then 8%, etc., while constantly promising to roll that percentage back when “things get better.” Can anyone say war bonds?
The catch would be that the percentage in Treasurys wouldn’t ever be liquid and would pay a horrible interest rate. Call it back door confiscation, call it redistribution, call it what you want. The bottom line is that the patriotic salami game is a more rational confiscatory approach for Washington to take. If you start seeing the American flag become more prominent in the background when the president or congressional leaders speak, the personal retirement salami game might be in play.
Forget milk. Got income? If I was emperor of the annuity world and had total power, I would have a “Got income” ad campaign that I would run ad nauseam (pun intended). Everyone loves their lifetime Social Security payments, which means that they are really closet income annuity lovers. Yes, I’m talking about you!
If Washington had a marketing brain, they would reframe the MyRA thought to MyAnnuity or MyPension. Lifetime income is what people really want, and those pension payments are what the private sector doesn’t offer anymore. All of those old defined benefit pension plans have pretty much been replaced by growth only defined contribution plans like 401(k)s.
What Washington doesn’t realize is that if they would package the confiscation thought through the benefits of a lifetime income stream, most of fly over America would be all for it in my opinion. The politicians could still play the patriotic salami game, but instead of trying to sell a rate of return or an unattractive yield, the sales close would be that everyone would get an additional retirement pension that they could combine with their Social Security payments. If President Obama would have pitched MyAnnuity or MyPension instead of MyRA, the majority of voters would still be singing the spiritual “Cumbaya.”
Political money grab football
With the majority of Americans not prepared at all for retirement, and just living a day to day game of survival, the “retirement fairness” argument resonates very strongly. In addition, the recent studies of income inequality showing the benefits of being in the top 1% just adds fuel to the class envy fire. Politicians of every party know this economic uneasiness represents the majority of voters, and at the end of the day, voters are what politicians care about. The money grab football game will be to determine which party can take credit for future income safety net ideas.
I think there is an eventuality to the government dictating how a portion of our personal retirement plans should be invested in government paper. By the way, I hope I am wrong about that, but I’m a pessimistic realist when it comes to Washington and their insatiable thirst for money and program giveaways.
My prediction is that they will start with government employees as the proving ground for an incremental retirement salami game idea, and will swiftly move to the private sector from there. President Obama badly missed on the initial sale with his MyRA stumblings and message vagueness. Fortunately, not many people were listening and the fawning mainstream media certainly didn’t know what to do with the idea at all to drive it home with the public. If I were a political consultant, I would advise them to resell it as MyAnnuity or MyPension.
People want income streams that they can never outlive. That is a voting majority winner.
Originally published by MarketWatch 3.4.14 – http://www.marketwatch.com/story/myra-should-be-myannuity-2014-03-04