Critics are already lining up to deride Pres. Barack Obama’s new retirement account, the myRA, saying that it will do almost nothing to help the working poor is destined to become another bloated bureaucratic system that will waste of taxpayers’ dollars by the billions.
myRA stands for My Retirement Account. The plan introduced by the President will authorize the Department of the Treasury to create several new types of savings plans for people who don’t have access to retirement plans sponsored by an employer. While any money deposited into a myRA account will not be tax-deductible, the funds will grow tax-deferred and, when withdrawn upon retirement, be tax-free. President Obama signed a memorandum on January 29 of this year directing the Department of the Treasury to create the new myRA savings program.
Although the program looks similar to a Roth IRA, there are a number of pointed differences. The first is that instead of a variety of investments that people can choose from, the myRA will establish a fund that is guaranteed by taxpayers and will invest in a government managed program. In fact, the new plan is very similar to the Thrift Savings Plan that is already available to federal workers.
The biggest problem that most critics have that the eye are a will use the working poor to finance the government deficit spending. Instead of selling bonds in public markets, the government will simply create accounts that invest in the government pool to raise funds.
When addressing the country in his State of the Union address, Pres. Obama said that the program “guarantees a decent return with no risk of losing what you save.” The fact of the matter is however that in 2013 the Thrift Savings Plan earned a ridiculously low 1.5%, hardly the type of interest that will enable a person to grow their retirement plan.
There’s actually a plan in place from the federal government to help low-income savers, a plan that matches $.50 for every dollar that’s contributed to an IRA. It’s called the Retirement Savings Contribution Credit or the “Savers Credit”. The government, in effect, already has a matching program similar to many large companies and organizations and similar to the myRA. And it’s not being used.
Many critics are already asking if the time to fund government programs should come to an end. They cite the fact that any plan that offers a lowly 1.5% return isn’t going to be much of an incentive for anyone to save. When you consider the fact that the United States still has a huge percentage of poor retirees in spite of what can only be called a gigantic government system that’s supposed to be helping them, most would have to agree that government programs don’t seem to be the answer.
This leads to many o predict that, years from now, the new myRA will be just as underutilized and will have costs that far exceed any benefit that it gives. Although it might have a noble name, many fear that it’s simply just another “feel-good” program to provide soundbites for politicians but that, in the end, will waste billions of taxpayer dollars.