During the recent State of the Union, we were introduced to a new flavor of retirement account, the MyRA. Even the president had a tough time spitting out the words, he started to say, “My IRA,” and then corrected himself, saying, My R A, meaning My Retirement Account. A few days later, the Treasury issued a press release to clarify the details regarding this account.
It has the same limits and tax status as a Roth IRA, and will be offered only through employers, presumably those who don’t offer a 401(k). It offers just one investment, a treasury product that offers a guaranteed rate, pretty low, of course, but with no downside risk. Once the account reaches $15,000, it must be transferred to a regular Roth IRA account.
Let’s start with Michael Kitces’ The New MyRA Roth IRA Proposal: A Financial Planner’s Guide To Everything We Know So Far. I’ll warn you, Michael’s discussion approaches 4,000 words, he looks at the rules for this account as well as the potential impact.
The Patriot Post comes right out and says it – MyRA Proposal Is a Head-Scratcher. They quote National Review’s Kevin Williamson, “Does anybody know why savings bonds went out of fashion? Because they are a terrible way to save money.” They conclude it may be the first step toward nationalizing our retirement accounts.
Next is myRA: What You Need To Know About The Newest Retirement Plan. Jay at The First Million is the Hardest sees one real benefit, the low $25 initial deposit. This may help people kickstart some savings. The downside? the low guaranteed return.
Money Reasons isn’t too high on the account either – I think the MyRA will be a poor investment option. That says it all. Don doesn’t care for the low return and sees the guarantee as an issue, feeling no good can come of governments guaranteeing anything.
The Oblivious Investor, Mike Piper, explained MyRA: Not “Like a Roth IRA.” It IS a Roth IRA. The distinctions are listed, including that it’s through your employer, and how it must be invested.
I’ve read enough about the MyRA to have my own opinion. It offers nothing that prompts me to say “great, that will help a certain group that needs a bit of help.” Part of the issue is that 62% of adults do not have an emergency fund to fall back on. I suspect that most of these 62% are cashing Friday’s paycheck at 5 pm to put dinner on the table at 7pm. It’s a sad reality. Those with no 401(k) can till use an IRA or Roth IRA to get the start this program offers. The problem remains, when you have no money to set aside, even a $1 minimum deposit wont make a difference. Sorry to appear such a cynic on this issue. I’m in favor of raising the minimum wage as a first step to helping people who are willing to work, but aren’t earning a living wage. How to get them to save for their future is a bit more complex.
What do you think? Will the MyRA help? A year from now will it be a success or go over like a lead balloon?