Obama's MyRAs: A 'Decent' Savings Return with 'No Risk'

Obama's MyRAs: A 'Decent' Savings Return with 'No Risk'President Obama introduced a new retirement savings program dubbed MyRA in his State of the Union address, which he would initiate without legislation.
But few details were provided for the starter program, essential a new savings bond that allows Americans to start their own “401K” — especially if employers don’t offer that option.  At this point, there are more questions than answers.
MyRAs would be available at little cost to either employer or employee, but the yield would be minimal.
Here is what we know about MyRAs.
Straight from the president:
“MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle-class Americans, offer every American access to an automatic IRA on the job, so they can save at work just like everybody in this chamber can.”
Here is some additional information:
MyRAs would act like small Roth IRAs via safe investment options that pay somewhat better than Treasury bills. A Roth IRA is a retirement account for after-tax earnings, but you can withdraw money after retiring without paying taxes on your investment returns.
Employers would participate by allowing employees to fund their MyRAs through payroll deductions, which could be as small as $5 per pay period.
Most employees can participate as long as they make less than $191,000.
MyRA savers can accrue balances of up to $15,000. After that they would have to roll the balance over into a regular, private Roth IRA. Voluntary rollover and withdrawal would be available as well, apparently with Roth IRA withdrawal penalty rules applying.
What would be the cost of MyRAs to the government/taxpayers?
The federal government would do some borrowing through a G Fund-like security, paying some interest along the way.
The “G Fund” is available to federal employees taking part in the Thrift Savings Plan. This fund reflects the advantages of short-term Treasury bills, with no credit or interest rate risk. But pays an interest rate based on the average of outstanding long-term Treasury bond rates.

Leave a Reply

Your email address will not be published. Required fields are marked *