myRA…  Let me start by saying that it looks like is should sounds like it should be pronounced Mira, and that’s not necessarily bad, but it definitely doesn’t look like it should be pronounced “My IRA” like I’ve heard the president say during the State Of The Union address.

Okay, why don’t I like the MyRA option?

To me is seems like a lame “bond” Roth IRA…  mostly because it’s a bond!?!  According to most financial authors, a young worker should not be in bonds!  Bonds are what old retired people use for a fixed income solution, not to be used by workers that need capital appreciation and growth!

Next reason I don’t like it is because it’s guaranteed not to lose value.  I think we’ve seen what happens when the government guarantees things… I’m not even going to mention the big city names that declared bankruptcy lately… Instead look at the prepaid tuition credits offered by state college savings plans, oh wait are there any of those left anymore?

Well at least we have social security and it’s solid… What, it’s not?  Then why doesn’t the government fix that first for the young workers of tomorrow?  Oh, it’s doesn’t make sense financially and the distributions may have to be reduced or some other radical changes made?  Oh… sad…

Since Social Security isn’t quite defunct yet, why have they decided to create something that seems like a poor investment option?

Well at least the Affordable Care Act is solid and error free… what’s that?  Oh in it’s current form, it kind of bites and has unforeseen errors both now and later.  Being in technology, I’m pretty sure on the back-end, there will be more errors discovered (but probably not communicated out to the public).  The front end is just forms for information collection, so if they messed that up, then the back-end must really be crappy.  Based on what I’ve heard the “Affordable” part of the title doesn’t make much sense, but I’m mentally wandering off topic so it’s time to get back to the topic at hand.

Okay, I don’t like myRA and I think it’s a poor investment option, but so what.  There are plenty of poor investment options and this is just another mediocre member of that crowd.  Hopefully most young people will be smart enough not to waste there time on such an option.  Especially where there are plenty of good Roth IRA options that only require a initial investment amount of $1000 or less if you look for them.

I think the guarantee is bad since people should learn to take sensible risks.  You see America was founded by taking risk all the time, practically every company in the USA was created by people willing to take a sensible financial risk.  Risk is part of reward and having an option without sensible risk is teaching young people a bad lesson in my opinion.

Financially, the myRA is better than nothing, but the problem is there is stuff out there already that is way better than nothing!

The Roth IRA is the way to go, and I’m sure anyone reading this article knows that already, but in case you don’t know where is why:

1. Based on previous history there is a better chance that an investment in an stock index fund will outperform a bond option
2. If you get in an emergency or some kind of tight bind you can withdraw all the money you contributed (but not the earnings if any) in a Roth IRA both tax and penalty free.  While this is an advantage, you must realize that the money should not be touched if possible!
3. A Roth IRA serves multiple purposes… like a tax shield for dividends (most dividends anyway) and future capital gains in the account, an emergency fund source, etc.  (read Roth IRA – Unusual Benefits for more)
4. In a Roth you can invest in stocks (commonally called equities), mutual funds, etfs and other options.  Isn’t diversity the spice of life?

The Roth IRA makes the myRA a poor investment options for working folks and especially young working folks!  I understand a myRA could be a gateway route to fund a Roth IRA, but I think the low return vs equities will discourage most people from participating.  I could be wrong though, but why not keep it simple and just get a roth IRA up front?

If you are thinking about going the myRA route, I think you should really think about the pros and cons.  To me it’s a dead option out the gate if you have any financial savvy or education at all.  That said it’s still something and I applaud the POTUS for providing such an option, even if I think it’s a poor choice and shouldn’t be used.  It will be interesting to see if it really gains in popularity…

What do you think,

Don