Wednesday, July 8, 2009

Here Comes Mandatory IRA

When Jim Cramer tries to sell you something, the game's usually over. Two days ago he tried to lay claim to the brilliant idea of IRA stuffed with special Treasury bonds "that will be safe" (in reality, far from it, but no matter). It is coming, whether you like it or not.

Breaking Down the Obama IRA (7/7/09 Smart Money)

"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.

"Companies that don't currently offer a retirement plan, employ 10 or more workers, and have been in business for at least two years would be required to enroll their employees in an IRA."

"John [David John, one of the plan's designers, the principal of The Retirement Security Project and a senior research fellow at the Heritage Foundation] says he hopes to have a draft of the legislation introduced to Congress within a month."

The legislation is being crafted for the White House by the Heritage Foundation (conservative think tank) and Brookings Institution (liberal think-tank, that's where Mr. J. Mark Iwry comes from, Obama official in charge at Treasury - see my older post).

I thought it's the Congress' job to craft a legislation.

Do you remember the talk, back in November last year, about confiscating 401K and IRA to create Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration?

If the mandatory IRAs to be created will be stuffed with the Treasury bonds, the government will effectively own the accounts.


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