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Obama introduces myRA savings plan

By Jennie L. Phipps · Bankrate.com
Wednesday, January 29, 2014
Posted: 10 am ET

If you don't have much money to devote to saving for retirement, the "myRA" plan that President Barack Obama announced in Tuesday night's State of the Union address could be the catalyst to get your retirement planning off the ground.

The president didn't offer many specifics, but he did say, "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."

MyRAs are expected to be similar to Roth IRAs, allowing initial investments as low as $25 and subsequent investments that could be as low as $5. If the plan offers an interest rate that is similar to the Thrift Savings Plan available to federal workers, it would have paid an average of 1.47 percent in 2012, the latest average rate published on the Thrift Savings Plan website. Once a myRA reaches a certain dollar level, a worker would be able to transfer the accumulated savings to a regular IRA.

Some critics have pooh-poohed the need for these accounts, but anyone who has tried to help a young adult set up a retirement savings account with a small amount of money knows that the current economic realities make that difficult. It is very hard to find an IRA savings plan that will accept an initial investment that is less than $1,000 without a commitment to regular payroll deductions. That leaves out people who are not on anyone's regular payroll. Plus, in today's low interest-rate environment, small savings accounts are likely to shrink rather than grow once even small fees are levied. If the myRA solves these problems, it could help lots of low-earning workers start saving for retirement.

Obama plans to encourage employers to offer myRAs, including handling payroll deductions for participants, but he's doing it by executive order rather than through a congressional vote, so it won't be a mandate that all employers must adopt. More information should be available later this week.

In the State of the Union speech, Obama also called on Congress to make changes to the current tax-advantaged retirement plans so that they do a better job of helping people save who aren't wealthy. "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," Obama told members of Congress.

In particular, he urged Congress to authorize a plan that would "offer every American access to an automatic IRA on the job, so they can save at work, just like everyone in this chamber can."

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38 Comments
Tess
January 29, 2014 at 2:31 pm

Liberals can't make a decision? Show me ONE Republican who can make their own decision or form their own opinion without the help of Fox News and their right wing extremist mouthpieces....

Republicans are like cattle, just follow the leader and don't ask questions....

Chicago Dude
January 29, 2014 at 2:30 pm

I am not quite sure I understand this program. I read somewhere that "Once someone’s account grows to $15,000, the myRA must be rolled over into a private-sector Roth IRA." So does this mean an individual can save $20,500 into their ROTH IRA? I already max out my 401k and my ROTH IRA. I would like to save more money. If I save an additional $1,500 per month into the myRA in November I will have $15,000 and I can then roll it over into my ROTH IRA and I will have saved $20,500 for that year into my ROTH IRA to grow tax free until retirement. Essentially this program will enable someone to save $20,500 per year into their ROTH IRA instead of $5,500 each year! Once in the ROTH IRA you can invest it in any number of ways that will have a higher return than the myRA. Is this correct?

Dave
January 29, 2014 at 2:27 pm

Maybe he will throw in a free cell phone then it would be worth it !

Dave
January 29, 2014 at 2:25 pm

1.47 % isn't going to build a nest egg!

Mike
January 29, 2014 at 2:13 pm

Funny,
Wasn't that what SS was supposed to be before the Congress and the successive Administration's decided it was a cash cow. Remember, Money to a politician is like "crack" to a "junkie"!!!

M. Little
January 29, 2014 at 2:09 pm

Another government plan where people put their money in & it is taken and used for something else like social security - this is just another way for the government to steal your money or maybe Obama is planning on taking it with him when he leaves the White House in two years.

JBP
January 29, 2014 at 1:46 pm

Retirement for me 22 years military and working when off duty, then 2 full time jobs for 5 years, then 17 years law enforcement, not buying any thing I could not afford payments on and save too. Those that don't want to work, make the choice, never to retire.

Dale
January 29, 2014 at 1:46 pm

Yes, and after you invest the money it will be transferred to the General Fund and the myRA Trust Fund will be underfunded and depend on General Tax Revenues when you need a distribution. Sounds like other underfunded entitlement programs, heh?

Peter
January 29, 2014 at 1:46 pm

I do not believe a word the lier in chief says. After lieing to the nation about Obamacare for years, he expects us to believe him now!!!!! Fool me once shame on you,fool me twice shame on me!!!!!!

Mike
January 29, 2014 at 1:41 pm

Yeah right Obama ---- like I'm going to put money away so your thieving hands can take it --- Stick it up your @$$

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