In January during his State of the Union Address, President Obama unveiled his new myRA program. “Let’s do more to help Americans save for retirement. 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 401(k)s. That’s why ... I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA,” he explained.
Of course, most workers don’t have pensions—they’re a now somewhat outdated model of retirement savings, left behind in the bygone era of employees working at the same job for most of their lives. And Social Security, by design, isn’t supposed to be “enough on its own”—it was designed as a supplement to help people who lived a disproportionately long time. But now people live to be a whole lot older and the age to receive Social Security hasn’t changed to account for that.
While the economy itself has not fully recovered, the market largely has — with many folks recouping the investments they lost in financial crash of 2008.
With the Saver’s Credit already in place, is a new government program the answer? Will the myRA program help Americans save for retirement and grow their savings with the gains of the market?
The myRA program invests in government bonds, not the stock market, so gains for savers will be significantly lower, albeit with a guarantee they’ll never lose their investment — so long as the dollar doesn’t lose a lot of value.
Through participating employers, employees can contribute to a Roth-style IRA (that is, contributing already taxed income) set up by the Treasury department. Except that, unlike a Roth IRA, “Savers will also be able to withdraw their contributions tax free at any time,” which removes the disincentive to cash in your retirement required by typical retirement accounts.
The myRA program already has its share of critics.
Scott Hanson, writing at CNBC, finds the concept a bit ironic:
"The myRA will actually have the working poor financing the government's deficit spending. By creating accounts that invest in a government pool, it’s yet another way for the Treasury to raise funds without having to sell bonds in the public markets."
John E. Girouard, at Forbes, calls the program a “wolf in sheep’s clothing” since our bonds have become less popular of an option in the market:
“That means the federal government is stuck with a lot of unpopular bonds and one sure-fire way to get rid of them is to sell them to the American public as a retirement savings vehicle.”
Whether or not this program is necessary is beyond debate: It is happening. And Congress isn’t involved — yet.
Controversy over the program aside, not much is known about how it will actually run. How will the myRA program be funded? How will it be administered? How many people does the Treasury expect will sign up?
A Treasury spokesperson tells THE WEEKLY STANDARD:
"Treasury is working to launch myRA in late 2014 with broader and scaled rollouts occurring after the initial launch. Treasury expects that there will be a minimal cost to operating the program, but we cannot provide an accurate estimate until we have actual data, including take up by myRA savers and the average duration of time the accounts are held by participants. In addition, we are currently in the process of evaluating proposals from financial agents to help administer the program, and we are unable to provide an estimate of such costs during that process.”
In other words, we have to implement the program to find out what’s in it.