Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Thoughts on Obama’s New Retirement Initiatives

Politics / Pensions & Retirement Feb 03, 2010 - 08:36 AM GMT

By: Nilus_Mattive


Best Financial Markets Analysis ArticleLast week I told you about some of Washington’s latest ideas on “fixing” Social Security. And the very next night — as part of his first State of the Union address — President Obama referenced some of his own ideas on the broader topic of retirement.

Today I’d like to run down these ideas … explain them … and tell you where I stand on each. By the way, details on all of these can be found on this White House webpage

Idea #1: Establishing Automatic IRAs

According to the White House, approximately half of our nation’s workforce currently lacks access to an employer-based retirement plan.

To fix that problem, Obama wants to require employers who do not presently offer retirement plans to automatically enroll their employees in direct-deposit Individual Retirement Accounts (IRA).

Some of Obama’s retirement ideas are fine, but none of them can replace the role of personal responsibility.
Some of Obama’s retirement ideas are fine, but none of them can replace the role of personal responsibility.

The default contribution rate would be 3 percent of pre-tax earnings, just like regular 401(k) plans. Participants could then decide to increase or decrease the amount being socked away.

They could also opt out of the plan altogether, which alleviates my concern about yet another governmental mandate replacing a personal freedom.

How would the money be invested?

The default option would likely be a diversified basket of investments, though individuals would be free to choose other strategies if they wanted to.

Now, in my experience, inertia IS a major reason people fail to take charge of their financial planning.

Plus, small employers would be exempt from the administrative hassles that this provision would create, while other employers would get financial help through tax credits.

So overall, I think this is a fine step on its own, and it will likely do more good than harm.

At the same time, an annual contribution equal to 3 percent of someone’s salary — invested conservatively — is clearly not going to solve their long-term retirement needs.

More troublesome to me is the fact that this plan will also include a potential taxpayer-funded contribution match via the “Savers Tax Credit.” But this is not a criticism of the automatic IRA plan itself.

And before I get to the savers tax credit, let me tell you about …

Idea #2: Subtle Changes to 401(k) Plans

The White House also wants to streamline the process for employers to automatically enroll their workers into existing 401(k) plans.

Again, I’m fine with this. Simply changing a company’s default option to enroll someone is a no-brainer.

And I’m also okay with other changes that the White House wants to see in the 401(k) arena, such as:

  • Making it easier for workers and plan sponsors to understand the fees they’re paying for investments, record-keeping, and other services being provided by plan managers.
  • Encouraging plan sponsors to provide employees with better information to help in their retirement planning (including unbiased investment advice and information on hard-to-understand investments such as target-date funds).
  • Asking employers to consider providing other investment choices in their plans, such as annuities.

All of these steps are going in the right direction.

After all, employees should be given as many investment choices as possible. They absolutely need accurate, conflict-free information. And participants — as well as plan providers — should be very clear on just how much they’re paying in fees to investment management companies.

[Editor's note: If you'd like to get conflict-free retirement planning information right now, check out Nilus' new online retirement course.]

So far so good on the new retirement proposals, right?

Yes, but there’s still …

Idea #3: Expanding the Savers Tax Credit

This tax credit, which is already on the books, is supposed to give families a tax incentive to save.

Of course, only some families qualify. Those making under $65,000 a year can claim up to 50 percent of the first $1,000, and families making anywhere up to $85,000 can get a partial credit.

Already, I have two problems here:

  • Philosophically, I reject the idea of credits, deductions, and other loopholes. Not only are they always based on arbitrary lines in the sand, but they are the main reason our tax code has become so complex and convoluted.
  • I think the idea itself misses the mark. Saving for one’s future shouldn’t require an external incentive. Besides, there are plenty of existing breaks available to people who choose to save right now — including the Roth IRA and its many advantages.

Hey, if the government wants to give everyone in the country $500 to put in a savings account, fine. It’s essentially a feel-good wash but at least it’s inclusive. THIS credit is just another misguided social program.

Worse yet, the White House wants to now make this credit refundable “to ensure that millions of additional middle-income families can take advantage of it even though they have no income tax liability.”

Wait, let me get this straight: There are a whole bunch of middle-income families who are not going to owe any income tax this year.

Therefore, those of us who do owe taxes should have some of our money incentivize those people to save?

Sorry, I just don’t get it. Nor can I support it.

And ultimately, the savers tax credit highlights the real problem with all of these new retirement measures — while they start with the best of intentions, they can’t replace the real secrets to a safe, secure retirement: Self-motivated planning and personal responsibility.

Best wishes,


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules