The myRA – My Retirement Account – was introduced in 2015. As noted by President Obama at that time, the program’s goal was to encourage millions of Americans to build savings that could supplement Social Security benefits.
Considering that many Americans already had access to a myriad of savings and retirement plans including 401(k) and 403(b)s; traditional and Roth IRAs, Rollover IRAs, health savings accounts, and 529 college savings plans, the question was, “How is the MyRA different and what does it add to the mix?”
At the time I wrote: Essentially, the MyRA is a type of Roth IRA. It will allow after-tax dollars to grow tax-free until retirement. Geared toward lower-income Americans, one objective is to encourage people to get in the habit of saving. Supporting that idea, this new plan will allow people to open a MyRA with as little as $25, and to contribute as little as $5 in regular payroll deductions. As many have noted, private financial services companies could offer such small accounts, however, they don’t because it’s not profitable for them to do so.
What are the key overarching outlines of the plan in addition to the $25 required to open an account and the $5 minimum requirement for payroll deductions? The MyRA is available only to those who don’t have a retirement plan through their employer, there are no matching contributions, it is only available to whose household income is less than $191,000 each year, and once the account balance hits $15,000 (or earlier if desired), it must be rolled into a private Roth IRA.
When the myRA was first introduced, I also noted that I didn’t believe anyone is under the impression that the new program alone would raise our (American’s) dismal savings rate or solve the retirement crisis. However, based on my understanding of the program, I did believe anything that encourages Americans to save more, and provides a low-cost mechanism for doing so, is a step in the right direction.
Unfortunately, as noted in a CNBC opinion piece, the myRA is being phased out by the new leadership at the U.S. Department of the Treasury because the agency doesn’t view it as cost effective given that demand has been “extremely low” and because “ample private sector solutions exist” that offer “no account maintenance fees, no minimum balance, and safe investment opportunities.”
There’s just one problem. These are alternative facts from Treasury.
Already, a program in its infancy has a substantial number of accounts and savings socked away – 30,000 accounts and $35 million saved according to Treasury officials. Moreover, there are no other comparable savings products available to low-and middle-income Americans. MyRA is the only retirement product available for “small savers” without fees or minimum balance requirements, and that does not penalize savers for withdrawing funds early.
Losers? Low-and middle-income Americans. Winners? The financial services industry. So long, myRA.