The Treasury Department is rolling out its new myRA retirement account proposal very cautiously and with little fanfare, CNBC reports.
The reason, David John, a senior policy analyst at AARP, told the network is that “They’re dealing with people’s money, so they want to make sure they get all the bugs out to handle the expected volume coming.”
John added that he expects there to be substantial use of the program once it’s fully rolled out.
President Obama announced myRA in his State of the Union address in January 2014, directing the Treasury to create “a safe, simple, and affordable ‘starter’ retirement savings account that will ultimately help millions of Americans begin to prepare for retirement.
Given the $15,000 cap on contributions, financial experts generally believe it is aimed at lower-income Americans to develop a savings plan, as well as some 50 million working individuals who don’t have access to a 401(k) retirement plan through their employer.
However, CNBC notes that apart from the U.S. Office of Personnel Management—which handles human resources for the federal government—the department “has yet to name any employers, including private-sector companies, participating in the pilot program it started in December. Employers have to set up direct-deposit capabilities for employees to open an account.”
myRA boasts three benefits for participants:
It’s simple: Contributions as low as $5 can be made through easy-to-use payroll deductions. Savers can keep the same myRA when changing jobs, and can also roll the balance over to a private-sector retirement account at any time. Savers will also be able to withdraw their contributions tax free at any time.
It’s safe: Contributions to the account are invested in a Treasury security, which means it will be backed by the full faith and credit of the United States. myRA’s feature government-backed principal protection, so the account balance supposedly will never decrease in value, and will earn the same interest rate that is available to federal employees for their retirement savings.
It’s affordable: There are no fees, and workers can enroll in the program with a minimum contribution of $25, and add to their savings through regular direct deposits as low as $5 each payday.
The biggest criticism of the myRA accounts, the network notes, is that there is only one investment option, arguing that young savers should be invested in growth assets.
The government, however, has put the emphasis on security and simplicity to attract individuals who often don’t trust financial intermediaries with their money.
“As advisors and analysts point out, people have to save before they can invest, and studies show that low-income individuals are apt to abandon the effort early if they experience a significant loss on their savings.”
See also:
- Treasury Discontinues myRA Retirement Saving Program
- Was myRA Misrepresented? Why the Trump Administration Killed the Program
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
