President Obama used his State of the Union address to unveil a new type of retirement account dubbed “MyRA”.  Recognizing that Americans are woefully unprepared for their retirement years, the President believes the MyRA offers individuals a safe option to induce them to begin saving for those golden years.  A CNBC report provides an explanation of how the MyRA would work, but the touted advantages include:

  • the ability to open an account with just $25,
  • the account would be invested in a government securities investment fund used by federal employees,
  •  the principal invested into the account would be guaranteed by the Federal government; and
  • the account is not subject to the high expenses associated with a conventional 401(K) account.

It is no coincidence that death care operators are finding these same Americans unprepared for their funeral and burial expenses.  As an industry, we too must find a way to get families to begin ‘saving’ for their funerals and burials.  Financial analysts are critical of the MyRA as falling short of the ‘solution’ for America’s growing pension crisis, but the account has value as an introduction to “saving”.   As alluded to in the January edition of the American Funeral Director, the non-guaranteed preneed contract has the same potential as the MyRA.   Fewer families can afford to purchase a preneed contract with a single payment, or even with 36 monthly payments.  Preneed insurance companies have acknowledged as much with their partnering with trusts companies.

Some of the criticism leveled at the MyRA is applicable to the preneed contract, and we will explore that in future posts.