Welcome to the willis report. Your somehow, your money, your voice. Tonight a new Government Program to help thh middle class invest for retirement. President obama and the administration started the new today selling it today. Its called my ra. What does it do . Will it help anybody . With us now the chairman of advisers and the president of tfg management will be joined a little later by ed from chatwood capital. Welcome to you both. To get started. I want to start with a description of what it is. And hear some details. Weve been reporting in this all day long, the detail from the president last night state of the union pretty thin. Here is what we know now. Youre only eligible if youre solidly middle class earning less than 191,000. You make after Tax Contribution like a roth ira. Its 25. You can get started cheap. And savings maximum you can have is 15 ,000. This is a completely liquid account from Senior Administration officials told me this afternoon. If youre following my twitter feed you probably know that. I was tweeting this afternoon. David, to you. Wouldnt it be easier if the administration wanted to encourage savings by the middle class to just get the fed to stoop manipulating Interest Rate, let them go higher and suddenly savings looks like a good deal. Of course it would be easier. This is something instead of nothing. Anything that adds to savings, gerri, is an improvement over zero. So its a miniprogram. Its a anyone ministep. It doesnt change a big picture of a lot of things. Mark, lets talk about that big picture. What we know is a 53 of americans dont have enough savings for retirement. We know its a problem. We know its an issue. Is this Program Going fill that gap . I dont really see how the program will fill the gap. I mean, right now the average american has a regular ira, a roth ira there are roth 401 k accounts available since 2006. So there are already many options. Nice to that, when you take a look at the reported Interest Rate they were talking about 1. 74 . Thats barely above inflation. Even if put are moneying in to the account how far is it going to get them . I do want to thank the president for starting this conversation though. Gerri let me tell you. The conversation has been started many times, and goes on and on and on. If you ask me, ive been covering it a long time. David, to you, you know, mark brought us something interesting, which is that, you know, there are a lot of guarantees in this program, and digging in to this today, i dont know how public this information is already. Guarantee principle, youre not going lose money on the principle. You can get out any time you want. Think about that. What if there is a cat class mick event like in the markets in 2006 and 2007 and everybody runs out of these investments. Does a government have to write a check to everyone across the country. We dont know that yet. But what we know is another version of a Treasury Security. Gerri right. That is available. Weve had these in the past from time to time. There are some type of a Treasury Security that special issue. For lower income, its got a cap. It has hanked before. Its an interesting thing, gerri. The same president did nothing to extend 2 payroll tax cut, which was district after tax money in the Social Security withholding payroll tax. He let it come back. So youre bailing out or trying to help people with a small step while you really hit them in the pocketbook a year ago with a big one. Gerri lets take a look at possible returns on this account; right. Essentially this is a treasury account administrated by your employer. Thats what they hope to do. The return right now on a g fund is Something Like 12. 69 . Its base order the yield on treasury from four years to 30. The s p 500 five year annualized return almost 18 . Mark, does it make sense . You know, theres so this things we dont know about this program yet. Its hard to say, but from what you, you know, just said about the s p and all the other Investment Options, im hard pressed to recommend to my clients to use this as opposed to all the other Investment Options out there. Gerri you know, what they were saying this afternoon, Senior Administration official, they want it to be simple, safe, and secure. They say it is a starter program for invest they want it to be a middle class investment plan. But david, to you, simple, safe, and secure. Those arent words i think of when i think of investing. If you want to get the youngest investors out there. Middle class, lower middle class. Earning to invest they need to learn about investing. Learning about investing is not a guaranteed government income. Pardon me, its not the way the markets work. I agree with you. If there is some mechanism which this could roll in to an index fund to get to the stock market, it could have a longer term growth aspect, then it would be more desire. There are some people, i think, gerri, who will do this because otherwise they would do nothing. Its additive in a small way. You get some additional savings. That is better than no savings. Thats what this is. Well, i want to bring in ed right now. The managing director of chatwood Capital Investment it to see what he has to say. I dont know if youve been able to hear. Yes. Gerri ive been spending the whole day looking at this talking to people in the administration trying to understand it. As weve been talking about, its something that the government tried to do for a long time. My big question, is this the governments business. Shouldnt we doing this with a myriad of Companies Across the country that are out there to help you save and invest . Yeah, gerri. You have been all over. I will tell you its almost as they said we have a state of the union address, lets just make up something quick. This isnt well thought out, gerri. We have a big problem. Like being hungry and someone giving you one tick tack. Its not going do anything. Its not going take care of the hunger or retirement. It does bring up the conversation, both gentlemen are spot on. Any money taxes deferred grows that much faster. If youre taxed at 28 . The money will grow 28 faster. Its also a way for any, you know, basically what youre doing is buying government bonds, the Interest Rate is nothing. It barely keeps up with inflation. Gerri you are buying uninvestment. You cant invest in anything also. Theres no allocation. If my financialed a provider said put your money in this one i would say no. But let me tell you, i understand the argument we need to get people saving. Im wondering the best way to do it. And 401 k , 401 k what weve seen is 53 of people unless theyre forced to, lose people do not invest only 53 . Mark, to you, is it going to be used . Thats an excellent point. Again, the employers have to participate. And so employers that already have a 401 k why would they do it . For employers that dont have a savings plan, theyve already made that choice, so, you know, i really believe it starts with education. You take a look at what is going on in the high schools and the middle schools. Gerri yes. We have to just do a lot more in explaining and teaching our children, you know, around the dinner table that you have to save for retirement. And you have to start early. So we can use compound interest. Gerri all of those concepts. All of those concepts. Folks need to know about. David, another thing we learned today, we heard the president say that, you know, rich people, they get this tax treatment that is better than what other folks get when theyre saving for retirement. But nobody lets them Employee Benefit research counsel. They came out and said its not true. What do you say . Well, you know, the clash war fair political attack has been going on for five years, and it didnt change in this speech. Gerri no. On the other hand, there are a lot of Small Businesses, there are a lot of Small Businesses that have 401 k . Our firm has a safe harbor, 3 4 00 1k which we give people. Dont have to contribute more unless they want to. We have provided it to them. Were an employer that likes to do that. We encourage that. How many would elect my ira as well or my ira as well . I dont know if we have to make it available well make it available. Thats part of what you do. Gerri well, you know, i have no idea how Many Employers out there are actually going make it available. Ed, i want to give you a chance to weigh in. You came in late sure. Gerri as you look at this, simple, safe, and secure. Is that what investing is all about . Thats what the program is supposed to be about. No, this thing is amateur hour. This is a way for do you put some money somewhere and guarantee a loss of purchasing power. I would never recommend this to a client based on what i know now. Im sure theyll add on to it. I think it was, you know, thrown together. I wasnt kidding at the last minute. No one in my business, and the other gentlemen, you have good pro on the show. Theyre not going to use it. The clients arent going to use it. Most people wont use it. Gerri i have to tell you. Treasury department has been working on this for some time, apparently. It goes to show you you dont know what government is going to come up with. Ed, david, mark, thank you for coming on. Im sure its not the last time well talk about it. Great job to all three of you. Thank you very much. Thank you. We want to know what you think. Here is our question tonight. What is needed . What do we need to fix a huge Retirement Crisis in it country. Another Government Program . Or jobs . Log on to jerry willis. Com. Vote on the righthand side of the screen. Ill share the results later tonight. Coming up the latest news from the fed. Stocks plummeting and more reon the retirement. As we answer the question. How do you do that. Well take a look how you fine tune the 401 k if you have one. Gerri the president s new Retirement Plan that we just discussed. It may have you asking the question whether your 401 k plan it all it could be. How to fine tune your requirement plan. The director of personal finance. Welcome back to the show. Its good to see you. Youve got some great idea. Some people are thinking i forgot about 40k. They p to know how to fine tune. Auto escalation. What is that . They nudge to better decision making. As you get raises, your company is going to steer more of your paycheck in to your 401 k contribution. Its more of a safe and painless way to step up your contribution rate. So itll go up a percentage point to three over time. And you dont have to do anything. You chose choose it assan option; is that right . Thats right. You check a box saying you want it to happen. It will happen automatically when your pay increases. I try to do im not always successful. I dont just say save in my 401 k . I have other vehicles i save in as well to make sure you dont know what is going to happen with 401 k . You want to make sure you have amp savings. I want to diversify. If they do their home work on the 401 k . It may find out the plan isnt that good. I want to put in enough to earn the matching contribution and think about expanding my investment opportunity. An ira would be an obvious next step. You might think about saving in taxable account. Make sure you manage the tax consequences of your investment. And thats all changing this year. Depending on how much money earned so we knee to Pay Attention as you say to the tax issue. To you like target date funds. Im not a fan. Why do you like them . I like them because they take out of investors hands the most difficult decisioning may being. They have a hard time figuring out the allocation. How much to allocate to stocks, bonds, and catch and gradually make it more conservative. So i would agree with you, gerri, that these plans arent all perfect. But most of the money in target date plans is in pretty good plans. So fidelity, vanguard, have the lion share of target day asset. I think they are doing a pretty decent to excellent job on the plan. I have to tell you. I think the number one problem people have with the 401 k besides ignoring it and not putting any money, they take money out. If theres any one single question i get from people all the time what is the penalty for early withdrawal. I just think thats a bad idea all together. Your view . Its a terrible idea. So youll pay that 10 penalty on early withdrawal and ordinary income tax. Depends on the tax bracket it could be half your money going out the door in penalty and tax. Youre starving your retirement portfolio that longterm compounding. Its a big no no. Gerri you say obviously you want to calculate how much you should be saving. A lot of people ask that question. Is there a good place to go. A good app to do that . I like a few of the retirement calculators that are out there. I think zero price has an excellent one. The thing i like it factors in Social Security income. Especially for people who are close to retirement and know theyll be able to count on Social Security. Itll take that in to account to help you see if you are saving enough. I say avail yourself of a few different tools just dont do with one app. Gerri i like that. You also said dont necessarily cash out with you leave the company. You might want to leave it there. Thank you for coming on the show tonight. Great to see you. Great to see you too. Log on to jerry willis. Com for more information on morning star weeklong special on 401 k . Its great stuff. The cuts keep on coming. You heard about the Program Reserve announcing it will africanamerican the bond purchases by another 10 billion a monday sending the dow down almost 200 points. Take a look. Ugly. Here with more is peter barns. Well, peter, looks like the fed it staying on course to wind down stimulus. Thats right. The market is trying to figure out what it means. It took the additional step of reducing the Major EconomicStimulus Program saying because growth has been picking up as it expected at the end of the policy meeting today announced it would reduce the billions and monthly bond purchases that it makes. The socalled quantititive easing, and the purchases have been designed to help keep Interest Rates down on longer term loans before it announce the 10 billion cut in december. Just announced another 10 billion cut today. And the move suggests that the fed is confident that the economic recovery is gaining strength despite some recent mixed indicators and turmoil in global stock markets. Markets are normalizing and that normal station means we get volatility. We get pullbacks. We get consolidations. That is normal. And last year was not normal. Last year was the major gym me by the fed. It created this bizarre feeling of a surreal feeling that the fed basically leads the market, which it has. Also, want to point out it was Ben Bernankes last meeting as the fed chairman. He wrapped up eight years as the leader of the fed. Including through the fulltime crisis and deputy janet yellen takee over february 1st. Shes expected to continue the policies. Gerri as we discussed so many times. Janet yell less than. Here is why i wanted to talk to you today. Youre a nerd im sure you read every word of the fed statement. What cool things did you find out. Youre right. Im going to director you to the first line in the release, which read, growth and Economic Activity picked up in recent quarters. It may not seem like a big deal to you. It got me excited. In december, the fed described Economic Growth as moderate but to fed watchers the phrase picked up suggests that the fed indeed thinks growth is getting stronger. And you recall that outlook came in to question earlier this month when we got the december jobs report. It came in with 74,000 new nonfarm payroll jobs lower than expected. Maybe because of bad weather. Notice the second part of that key line it says Economic Activity picked up in recent quarters. The fed did not say in recent month. So it looks like the fed thinks that december jobs report was probably an anomaly, gerri. It thinks the underlying growth is pretty good. So. That got us excited. Thank you for reading the tea leaves for us. Its hand to understand it. And later in the show were going tell you how thieves profit from your stolen credit card data. And next how much, how much did target know before the massive data breach. Could they have done something to keep your Information Safe . The latest on all of this after the break. You know how painful heartburn can be. For fast, long lasting relief, use doctor recommended gaviscon®. Only gaviscon® forms a protective barrier that helps block stomach acid from splashing up relieving the pain quickly. Try fast, long lasting gaviscon®. Gerri new information coming out moments ago on the data breach a target. The retail giant thing that the cyberthief used credentials that they stole from their very own vendors. So what does this all mean . Weighing in with us is the cofounder and chief Technology Officer for vera coat. Lets get you what it is that the company is saying tonight. Are you surprised by this . This is not very surprising at all. We call this a supplychain risk. Risk from the vendors and suppliers, it adds to your risk because they first break into the suppliers and they use that avenue to get into the main part. Gerri they indicated that the intruder tool vendor credentials which were used to access our system. They say as we have confirmed, we have eliminated them out where access and we are taking extra caution such as limiting or updating access to some of our platforms while the investigation continues. Even though these were bad guys, they used the system badly. Could target do everything to keep it safe . They need to make sure that they have the back on technology from the right security and all their systems were just opening it up t