http://money.cnn.com/...
I am well aware that individual debt and lack of savings is a problem in our country. It is true.
I also do like the idea of the government facilitating better plans and ways for people to secure their retirement and ensure a reasonable quality of life.
That's why I favor things like universal health care and social security, because it is the right thing to do.
But reading this CNNMoney.com article about giving tax rebates directly into IRAs to encourage savings for retirement, I find this kind of ridiculous.
Not so long ago, many people on the left crying about Bush's "ownership society" which did place a huge risk on people's social security funds. Rightfully so, this never came to pass.
Now, Senator Obama has a plan that will offer make small businesses have to offer different types of IRA plans for employees and would offer a government match to people that are enrolled in automatic deduction plans.
On the surface, the idea of encouraging people to automatically deduct 1%, 2%, 5%, or more from their checks and paying themselves first, as a way to ensure savings is quite an intelligent plan. I advocate that to all of my friends, myself and anyone that I talk to. That's just smart to do. Even if you only put away $5 a week, over time that adds up.
But having people automatically invest money into low cost mutual funds is not the best way of increasing savings.
First of all, having owned a small business, the expense of starting up an employee 401(k) program can be quite expensive, depending on the revenues that you generate. For small or struggling businesses, that would be a huge issue in their survival or ability to thrive. So you might discourage small businesses or entrepreneurs by adding to their initial start up costs.
Next, even though over time mutual funds do perform very well, returning, on average 5-10%, if not more over extended periods. The average American might not have the time or the understanding to manage their account and ensure that they are placing their money in the right places. And, if anyone is going to get screwed, it would be the poorly educated person that hasn't really had the chance to save adequately for retirement to begin with. Obviously not the manager of the fund, who gets paid based upon the funds managed.
Third, having the government match a specific amount of those monies that were saved isn't a good idea if a) the money is invested in a poorly managed fund b) the cost of setting up this type of fund or 401(k) plan makes any number of small business owners be forced to cut back their company, delay innovation, or not bring on staff and c) if the average American still doesn't have a grip on managing his/her money in a way that allows the family to live within their means and build for the future.
The estimated 18.8 billion dollars that this would cost the government could be much better spent on other areas of enhancing American's lives. Areas like providing education for people on handling their money, offering programs or extending programs that assist people in paying down or managing their debt, helping to reeducate workers to allow them to gain skills that will allow them to get better, higher paying jobs, offering incentives for small businesses or emerging technologies to bring on more workers, or just further safe guarding social security so that possibly the benefits people receive would be greater at retirement, which would be a much safer investment than placing money in low cost mutual funds.
I, for one, applaud the idea of finding solutions to people's saving for retirement problem, but I don't advocate stepping in in some kind of haphazard way.
To me, this plays much like the gas tax relief issue....
Putting a little ointment on a problem that needs some serious surgery.