WASHINGTON – If you work for a business that offers no retirement benefits, Jacob Lew has a deal for you.
D.C. pushes new myRA savings plan
March 12, 2016 at 2:29AM
The U.S. Treasury secretary spent part of his day Friday trying to drum up business for the Obama administration's new myRA program.
MyRA is one of the ways the White House hopes to address a $4.13 trillion shortfall in retirement savings that stands to leave millions of U.S. senior citizens penniless in the coming decades. MyRA lets workers without workplace retirement plans save money.
Launched late in 2015, myRA allows Americans under 50 to contribute up to $5,500 a year to a retirement fund invested in government-guaranteed U.S. Treasury bonds. People 50 and over can kick in up to $6,500 a year. The savings program maxes out at $15,000 per person when savers will ideally roll their savings into private individual retirement accounts, known as IRAs.
"MyRA is something we have designed to try and help people get started [saving] earlier when they think they don't have options to save," Lew told reporters.
He acknowledged that a single program cannot fix the nation's retirement funding crisis. That, he said, will require multiple strategies, including legislation, and will likely take a generation to resolve. Still, as tax season approaches and people for the first time will be able to have the IRS designate portions of their refunds to myRA, the secretary wanted to get in his pitch for behavior modification.
In its first three months, Lew said, the program has attracted 10,000 people.
That is a minuscule number compared to what experts say will be needed.
"MyRA is certainly a step in the right direction," said Jack VanDerhei of the Employee Benefit Research Institute, a nonprofit, nonpartisan think tank. "Whether it can be a big enough step for people at risk is debatable. We need to see how many people sign up and whether it promotes a culture of saving."
A study by the Pew Charitable Trusts shows that more than 30 million U.S. workers lack access to an employer-provided retirement plan. Many are among the country's lowest-paid employees. They are not people who can be ignored, said the employee benefit institute's VanDerhei.
Minnesota residents rank high in their ability and wellness to save, the Pew study says. Sixty-nine percent of the state's workers have access to workplace retirement plans and 61 percent of workers participate in those plans. Nationwide, only Wisconsin ranks higher.
Among the reasons for Minnesota's elevated position is its mix of major employers. About 77 percent of businesses employ 100 or more people, Pew said, with 52 percent employing more than 500. Meanwhile, the state's share of small employers, the ones least likely to offer workers a savings vehicle, is just 9 percent.
Still, Pew said roughly 400,000 Minnesotans lack access to an employer-provided retirement program. Those are the people myRA targets.
Lew said the administration has not yet set a goal for the number of savers it wants to attract. He said his agency had to first address "obstacles" to saving. People are, for instance, more concerned about preserving their investment principle rather than the rate of return they collect. Treasury bonds meet that criteria.
Beyond a stable portfolio are issues of simplicity and affordability, Lew said. MyRA contributions can be made in any amount and in any time frame. But the key to the program may be cultural as much as mathematic. The program is entirely voluntary. There is no obligation for regular deposits and no penalties for the withdrawal of principle because like a traditional Roth IRA, contributions come after employer withholding taxes.
"The challenge is going to be to get this in front of people knowing that the audience we're trying to communicate with historically has been the group least likely to participate in retirement savings," Lew said.
Without major changes in how and how much Americans set aside for their so-called Golden Years, VanDerhei explained, the country faces "mass bankruptcy of retirees."
For information on opening a myRA account, go to myRA.gov
Jim Spencer • 202-383-6123
Duluth-based health system cited high rates of claim denials and delayed payments as the reason for exiting the plans.
