Can Obama’s myRA Help Americans Avoid a Retirement Crisis?



President Barack Obama is apparently as sick and tired of Congress as the American public is. Calling out the legislature for its destructive divisiveness during his 2014 State of the Union address, the president said that “wherever and whenever I can take steps without legislation to expand opportunity for more American families, that’s what I’m going to do.”

He wasn’t messing around. Later in his address, Obama summoned the specter of retirement and alluded to the fact that millions of Americans are woefully unprepared. “Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401ks,” he said.

“That’s why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings,” he continued. “MyRA. It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in.”

Less than 24 hours later, the president gave a speech at a Pennsylvania steel plant, after which he signed the order to create the myRA program, directing the Treasury Department to begin the process of selecting a private-sector money management firm to run the program. The process will begin within the next few weeks and should be completed in the coming months.

The myRA program is designed to help Americans — particularly those at the lower end of the income spectrum who don’t already have access to pension or a 401k, or the means to fund an IRA — begin the process of building a retirement nest egg.

The myRA program essentially allows people to invest in long-term savings bonds that are guaranteed by the U.S. government. Contributions would come directly out of a person’s paycheck. Like a Roth IRA, contributions will be taxed but withdrawals won’t, and a person can withdraw their contributions at any time. The minimum initial investment is just $25, and subsequent investments can be made in installments as small as $5. Accounts will be transferable between employers. Managing employee participation in the program is not supposed to cost employers anything.

The myRA program will be available to households earning up to $191,000 per year. People will be able to contribute up to $15,000 to their myRA account before they have to roll it over into an IRA. A person’s myRA account will earn the same interest rate as the Government Securities Investment Fund, which is variable. Last year, it earned about 1.74 percent.