With much fanfare, Barack Obama recently announced his plan to solve the retirement crisis: a new savings vehicle called the MyRA.
You see, MyRA is actually another fraudulent scheme to transfer wealth from the young to the government. These long-suffering youths already pay hefty payroll taxes to fund social security as well as oversized health insurance premiums to subsidize middle-aged buyers.
On top of that, many young people are burdened with student loans, which mostly fund the extravagant lifestyles of older professors – many of whom teach less than three hours a week. In fact, between state, local, and national taxes, young people pay some of the highest taxes in the world – and politicians in D.C. wonder why these youths still live with their parents!
The younger generation is slipping into poverty, and the reason is simple: They’ve been fleeced by politicians, stripped of nearly every last cent and left with no money to save.
Young Americans Left for Dead
Young people aren’t saving, Obama says, so let’s create a scheme that puts their money into U.S. government bonds! And in his infinite benevolence, Obama will insure the whole scheme so that nobody loses a dime.
This sounds good to the average saver because he or she has probably been abused by Wall Street. In fact, many people are still looking at IRA and brokerage balances destroyed by the financial crisis.
And the MyRA couldn’t be simpler, as it boasts just one investment choice: a Treasury bond fund stuffed with U.S. Treasury bonds. While account holders allegedly can’t lose money on this investment, I’d argue that they’re likely losing every month as the value of their currency is inflated away. Just look at 2012, when the fund returned a miserly 1.47% (and inflation more than doubled that at 3%.)
Anyone who invests in Treasury bonds will tell you that they absolutely can lose money. When interest rates go up, the value of an outstanding bond with a lower coupon goes down in value. When interest rates go down, the value of outstanding bonds with a higher coupon go up in value. The only way that you don’t lose is to hold the bond to maturity; and by then, you’ve likely lost to inflation.
Therefore, even when you get paid a return on these bonds, the currency you get back in retirement will be worth substantially less than the currency that you put into the account. This is no way to save for retirement, unless you plan to live on food stamps in a government housing project.