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Some People Are Wondering If Obama’s MyRA Could Mean The End For 401ks (Nerd’s Eye View)
Defined benefit plans (pension plans) — which are paid in addition to an employees’ salary — have been declining, as defined contribution plans (like 401k plans) have been on the rise. But now Michael Kitces at Nerd’s Eye View is asking whether MyRa — a program of small Roth IRAs for those who do not have access to company retirement savings plans introduced by president Obama during his State of the Union address — could signal the “beginning of the end of 401ks.”
“What’s significant about the MyRA is that it provides the mechanism for employees to someday be defaulted into automatic enrollment (or controversially, potentially even mandatory enrollment) and automatic escalation of future contributions, just as is now available with 401(k) plans,” writes Kitces.
This he says is intended to bring the two more in lock-step, “yet the IRA/MyRA version would be more easily portable (as it’s not tied to the employer in the first place), and the only material difference would be the contribution limits (which can be changed). …Employers may simply be able to pay their employees a full salary, and let the employee decide whether and how much to allocate to everything from health insurance to retirement contributions and anything else.”
The 4% rule says investors can withdraw 4% of their savings in the first year of their retirement and then increase it each year in keeping with inflation. Katherine Roy, J.P. Morgan Asset Management’s chief retirement strategist, however thinks investors should be willing to modify this, and instead advisors should help clients adjust their spending when portfolio returns are lower and vice-versa, reports Debbie Carlson at FA Mag.
Everything You Thought You Knew About The 10-Year Is Wrong (Business Insider)
Economics 101 teaches that recoveries are accompanied with rising rates, but in recent history it’s been hard to see this. “Bonds tend to have a hard time selling off if central banks are not tightening,” Jan Loeys of JP Morgan writes. “The steadily lower growth rates over the last 3 recoveries have induced steadily lower policy rates, which in turn have created faster and a greater number of asset bubbles that have been imploding before inflation has a chance to accelerate and central banks can move into a tight stance.”
Advisors Should Familiarise Themselves With HSAs (The Wall Street Journal)
Health Savings Accounts (HSAs) are tax deductible savings accounts associated with plans that have high deductibles and Louis Kokernak at Haven Financial Advisors thinks investors and advisors should look into these. “The HSAs can be used as a tax shelter to build long-term savings for medical expenses in the future,” he writes in the WSJ.
“Like a 401(k), the contributions you make to an HSA are tax deductible. And like a Roth IRA, the distributions are tax free, as long as the money is spent on qualified medical expenses. HSAs truly offer the best of both worlds,” he writes. That being said HSAs don’t make sense for people with chronic conditions and that don’t have job security.
2014 Is Still Really Dark For Hedge Funds (Business Insider)
Hedge funds continue to have a rough year. A new report from Preqin shows that the best-performing strategy isn’t up even 1%. Event driven funds, the best performing strategy in April was up 0.6%, while the worst-performing strategy, long/short is down an average of 0.42%.
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