Obama’s MyRA Retirement Account Proposal - Will It Help Savers?

In President Obama’s State of the Union speech, a new retirement account was proposed call the MyRA. This MyRA is intended to provide retirement accounts to employees of companies that don’t offer plans. The President said he will direct the Treasury by executive order to create this new retirement plan.

Many savers may be wondering if this will help them. Thanks to DA member mustsavemore for asking this question in the forum. There are not many details that have been released about the plan. Before judging the plan, let’s first review how the President described it. Below is the State of the Union address transcript excerpt covering the MyRA (source NPR):

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 401ks. That's why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: 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. 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 to nothing for middle-class Americans. Offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can.

I appreciate the President’s concern that the stock market isn’t the universal silver bullet for building retirement savings. It’s nice to have products like savings bonds that offer decent returns with no risk of losing principal.

I’m a little worried that the President wants to end tax breaks that help the wealthy to save. Some of those tax breaks may be helping savers who probably don’t consider themselves wealthy. That kind of thinking may have been the cause of the big reductions in the annual purchase limits of savings bonds (This decision was made in 2007 before Obama's administration.)

I’ve read a few OpEds about the proposed MyRA. This Forbes piece says the plan doesn’t go far enough to fix the retirement system. It concludes:

The problem isn’t that Americans don’t have enough ways to save for retirement — they have too many. Look at the alphabet soup of plans from 401(k)s, 403(b)s, 457s to Roth IRAs. Why not consolidate them and make the tax breaks uniform through credits?

An IRA consultant mentioned in this MarketWatch blog article that the MyRA "would be a way to put away additional money on a tax-deferred basis." However, an important question still needs to be answered. That is "how long someone would have to hold a MyRA before they can roll the money into their traditional IRA or other retirement account." Lastly, the article pointed out that the MyRA was just something mentioned in the State of the Union address. It doesn’t mean that the MyRA will soon be implemented.

Finally, I know it’s impossible to ignore politics from this topic, but in your comments let’s keep the discussion respectful to the President, to other government leaders and to other commenters.