The “myRA” plan unveiled by President Barack Obama in his 2014 State of the Union speech will be rolled out in a pilot project by the Treasury Department this year.
In concept, myRa (my Retirement Account) is getting generally positive reviews as low-level plan for employees who don’t have employer-sponsored retirement accounts. By the White House’s estimate, that’s about half of all U.S. workers.
Saving for retirement is a good thing. Not enough Americans are putting enough money aside to ensure a comfortable retirement. According to CNBC, fully a quarter of the workforce isn’t saving any amount.
Beyond that, a significant number of the remaining 75 percent aren’t saving enough money to maintain their lifestyles once they’ve left the fields and gone to the barn. If workers can squirrel away something — anything — more than they’re presently doing, it will make their post-retirement lives easier and put less pressure on taxpayers to answer the inevitable call to “do something.”
Here’s a Treasury Department description of myRA. The catch, so to speak, comes at the end:
“The retirement savings account will be a Roth IRA and have the same tax treatment and follow the rules of Roth IRAs. It will have no fees and can be opened for as little as $25 through payroll direct deposit. The account balance will never go down in value and the security in the account, like other U.S. Savings Bonds and Treasury securities, will be backed by the U.S. Treasury.”
“Backed by the U.S. Treasury” is problematic to the degree that the country has nearly an $18 trillion national debt and continues to run annual deficits between $600 billion and $1 trillion.
If employers participate in myRa (employers don’t make matching contributions), employees need only contribute $25 to enter the program and can put in as little as $5 a paycheck. Investment growth is tax-free, as are withdrawals.
Granted, no one on these numbers is going to live like Warren Buffett, post-retirement, but it’s something.
The myRa program will be open to individuals earning up to $129,000 and $191,000 for a couple. Under age 50, the maximum annual contribution is $5,500, over 50 is $6,500.
When an employee’s contribution reaches $15,000, they’ll be required to roll it over into a private-sector retirement account.
Among other carrots being dangled: For employers, there are no administrative costs because the government will pay them. For employees, it’s promised that the account will never go down in value, backed by the U.S. Treasury, and it moves with the employee if he or she changes jobs.
Where will the money be invested? As CNNMoney reports,
“unlike traditional Roth IRAs, the accounts will solely invest in government savings bonds. Accounts will earn the same rate as the Thrift Savings Plan’s Government Securities Investment Fund that it offers to federal workers.”
Initially, it looks like myRa won’t hurt, and it might help. The next step is waiting until we’ve gotten past the news releases and fact sheets and see the details.