The U.S. Department of the Treasury has announced the national launch of the myRA program, a government-backed retirement plan for people who don’t have access to a retirement savings plan at work or who haven’t found an easy enough way to save.
A form of Roth IRA, myRA allows workers to save their after-tax dollars for retirement. It’s aimed at overcoming some obstacles that keep some workers from saving.
Many Americans are not prepared for retirement. Thirty-one percent of workers have no retirement savings or pension, including nearly a quarter of those older than 45, according to a report the Federal Reserve released this year. Meanwhile, only about half of nongovernment workers participate in retirement plans, according to the Bureau of Labor Statistics.
It costs nothing to open a myRA account, and there are no fees. Contributions can be small, even a couple of dollars, and the accounts have no minimum balance. Workers may contribute up to $5,500 a year, or $6,500 a year for people age 50 and up.
The government, which rolled out myRA on Nov. 4, had been testing the program through an employment-based pilot that allowed people to set up automatic deductions from their paychecks. Now it’s is offering myRA to a broader population through three ways to save: by direct deposit, from a checking or savings account, or by directing all or part of a federal tax refund to the account.
People can sign up through myRA.gov. Savers can withdraw the cash they put in tax-free and penalty-free at any time, but earned interest is subject to the same restrictions as Roth IRA accounts. Workers who change jobs also can carry the plan from one employer to the next.
The myRA accounts were proposed by President Barack Obama in January 2014. Currently, the Center for Social Development (CSD) is engaged in a Treasury-funded project, called myRA at Tax Time, to investigate combinations of messages and interest in opening myRA accounts online at tax time to determine which is most effective and appealing to consumers. Intuit Inc. is a partner in the research.
The project brings together university researchers and industry leaders to find solutions to assist lower-income Americans to start their own retirement savings. Finding safe, easy, effective ways to help workers create retirement accounts has potential for improving the long-term financial security of many households.
Michal Grinstein-Weiss, associate director of CSD and a professor at the Brown School, is leading the project in collaboration with David Williams, chief tax officer with Intuit Inc., and Dan Ariely, the James B. Duke Professor of Behavioral Economics at Duke University.
Michael Sherraden, director of CSD and the George Warren Brown Distinguished University Professor, praised myRA development and CSD research as positive steps.
“The myRA platform has great potential. Full inclusion in retirement savings, however, will require more than behavioral changes,” Sherraden said. “We have learned in many studies that automatic enrollment is the best strategy for inclusion.”
Also, he pointed out, current public subsidies for retirement savings go mostly to the wealthiest households through tax deferrals. “A better retirement savings policy would distribute retirement subsidies fairly to everyone,” he said.