In 2014, then-US president Barack Obama announced a new type of retirement account. Called “myRA,” the program was designed to provide a Roth IRA-type investment opportunity to lower-income workers who may not have much in terms of savings. Essentially, you could contribute after-tax earnings of up to $5,500 per year (or up to $6,500 per year if older than 50), which could be withdrawn tax-free for the purposes of retirement. But it also has an account cap of $15,000.
The Trump administration has ended this program.
What made this account so accessible to lower-income workers—who don’t have employee-funded retirement plan options—is, first of all, there was no minimum requirement to open an account. Also, employees could simply opt to fund it through an automatic payroll deduction or by making direct payments through their bank, from a savings or a checking account.
This program was secure because the funds would only invest in new United States Treasury retirement savings bonds. These are guaranteed to never lose their value; but at a trade off of a lower return yield than a traditional stock.
Now, this might sound like a good idea, in theory, but apparently it had its detractors. Scott Hanson, CFP, argues: “The myRA actually has 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 market.”
Roughly 30,000 Americans have, so far, contributed upwards of $34 million to the myRA program. Unfortunately about 2/3 of these accounts have a median balance of only $500 and the remaining third have made no contributions at all. This would be fine—it is your choice, after all—if it did not cost the federal government $70 million to manage the program.
Indeed, US Treasurer Jovita Carranza admits, “Unfortunately, there has been very little demand for the program and the cost to taxpayers cannot be justified by the assets in the program. Fortunately, ample private-sector solutions exist, which resulted in less appeal for myRA.”. Fortunately, ample private-sector solutions exist, which resulted in less appeal for myRA.”
As such, those who have opted to participate should have received an email this morning in regards to the cessation of the program. Each participant will also be provided with other information regarding their future investment options.