- Created on Friday, 31 January 2014 10:34
- Written by John Grimaldi
Washington, DC - President Obama took a tip from the Association of Mature American Citizens in his State of the Union speech on Tuesday, proposing a retirement savings program. Dan Weber, AMAC president, noted that "the president's MyRA plan sounds an awful lot like the Early Retirement Account [ERA] we've been proposing for more than a year and a half as an aspect of our Social Security Guarantee initiative."
There are differences between the MyRA and the ERA, he noted. "But it appears our message is getting through - an individual, discretionary retirement savings plan is a must have if we are to provide a true Social Security Guarantee for our children and future generations. The MyRA is a baby step in the right direction. It's a 'starter savings account,' as the president described it, but it would be government backed-and controlled. The ERA we've proposed would offer even greater benefits and incentives for users and puts control of their plans in their hands, not the government."
The AMAC chief noted that the ERA is similar to an IRA or a 401(k) plan. But, in order to ensure that the funds in the Early Retirement Account will not be lost through investment with extreme risk, half of the moneys in the ERA accounts would have to be invested in guaranteed interest products such as government bonds or annuity contracts. Workers would be free to invest their balances in any other investment that meets certain suitability standards."
Weber pointed out that workers opting for the supplemental ERA would earn a substantial amount of extra income when they retire, in addition to their regular earned Social Security benefits. "For example a 25-year-old who contributes only $15 a week to an IRA would get $165,407 in additional income by retirement. Increase the amount to $45 a week and the windfall would be $352,389 upon retirement."
He said that polling suggests such a voluntary, personal Social Security supplement would be popular. It's easy to understand, it's voluntary and it's a logical hedge against the vagaries of the future.
Gallup has been tracking self-funded retirement options since 2011 and concludes that 401(k) plans and IRAs are the most commonly expected "major source" of retirement funds, followed by Social Security, among workers currently paying into the system.
This supports the AMAC notion that future retirees would like a way to enhance their Social Security income when they become eligible, Weber said.
"The ERA is not intended to privatize Social Security. The basic benefits from Social Security would remain the same," he concluded.