The President last night announced a big change to the way Americans could save for retirement. Instead of the traditional pensions, IRAs, or 401Ks. This new plan dubbed MyRAs offers a basic way for people who have never saved before to start saving, it offers protection of principal, and invests your money in the government securities investment fund. What you give up for this protection is any chance of a real increase in the value of your principal. You will just barely beat inflation with the current return. After taxes you might not have any growth. It is good that you are wanting to save and develop a good way to have more income in retirement. This might not be the best course of action though.
It seems a good idea for those wanting to start investing and without any easy way to do so before. I think it is closer to privatizing social security or shoring up social security with individuals saving their own money. I am very much in favor of individuals saving and investing on their own for their needs and wants. Each individual can make his own choice about where to put his money and how to use it. Instead of letting the government decide what is a good investment, you can choose the investments that fit you and the companies you think are doing well. MyRAs good start but we can finish stronger than that.
We still have much to find out about MyRAs and the effects it will have but if you really want to start saving and growing wealth for retirement you need a different approach. Young people like myself should be putting in at least 10% of income in savings, preferably more. I aim for 25%, it is doable. You just have to be disciplined. Cutting expenses that are unnecessary extravagances. This could be eating out everyday or buying a new pair of shoes weekly. Those buys add up and by sacrificing a little now, it can make the difference between retiring early or working through retirement. Saving 25% in four years you would hopefully have a years worth of income and a little extra. This is a nice cushion if you need to change jobs, lose your job, or a medical emergency. If none of that happens then it will just continue to grow and grow for use later.
MyRAs are probably not the future and your own investing choices will make you more money and help you out more but if you are new it could be a good way to start be diligent and saving money for emergencies and retirement. Saving and investing can make you very wealthy in the end but only with hard work.
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