In the midst of what many economists call a “retirement crisis,” President Barack Obama took the occasion of his State of the Union address to propose a new retirement savings program involving employer payroll deductions and government-sponsored savings accounts.
The program would be known as MyRA (My Retirement Account), and it would enable workers who don’t have access to a 401(k) plan to set aside their own retirement dollars at work. It would be up to employers to manage such a program for their employees, and to the Treasury Department at the national level.
“While the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s,” Obama said. “MyRA guarantees a decent return with no risk of losing what you have put in.”
Reaction in the media to “MyRA” was mixed following the President’s address.
Brian Graff, CEO of the American Society of Pension Professionals & Actuaries, was quoted in Bloomberg as saying, “This isn’t earth-shattering stuff. But it is a step in the right direction to get more people saving for retirement, which I would think is a bipartisan issue.”
But at Entrepreneur, columnist Catherine Clifford wrote that, “while this could spell significant new administrative work on the part of small-business owners, keep in mind that many a plan has been unveiled to much pomp and circumstance during many a State of the Union addresses and then have amounted to nothing. After all, this is politics.”
So how do professional retirement planners weigh-in on the President’s plan? Five retirement experts weighed in on what they understand of the proposal so far. One thought the plan was a good one. Another thought the proposal had merit but more information is needed. One was totally opposed to the idea. The remaining two saw no real point to the proposal since other options for retirement savings are available.
A bad idea. Period!
Mincing no words in her reaction to the president’s proposal is financial planner Susan Johns, at Your Financial Focus said, “This is not what Americans need. It is not what employers need. Education about savings and investments is what is needed.
It is already pretty easy to save — if one wants to do so. You can open an IRA account at your bank or at a no-load mutual fund company with automatic deductions from your bank account,” Johns said
Simply put, “MyRA is a bad idea,” she said.
Missing the point
Not seeing the point of having MyRA is Frank C. Boucher, of Boucher Financial Planning Services.
“My initial reaction was, “Why?” We already have IRA’s,” Boucher said, adding is still early to form too firm an opinion.
“On one hand, it makes it easier for people to save. I also like the uncomplicated interest crediting. It can be a good stepping stone for workers who will one day graduate into the more advanced retirement options like 401(k)’s and IRA’s,” Boucher said.
Still, “I question whether or not it will result in meaningful savings. This proposal appears to be targeted at lower income workers and this is a demographic whose disposable or “savable” income is limited at best,” Boucher said. “I can envision savers withdrawing their savings as soon as they are faced with an unexpected expense like a car repair or appliance replacement.”
Boucher also said “the proposal places one more administrative burden on employers and, I think employers have more than enough already. I’ll be interested to see how the final regulations turn out.”
He further said that was unsure what the primary elements of the program should be. ”I was surprised to learn that this was on the president’s agenda with all of the other things that are going on right now. I really believe we have enough savings incentives already. I guess we could require some sort of mandatory contribution for those not participating in retirement plans, but I believe that would be a very hard sell to Congress and consumers alike,” he said
Ultimately, Boucher said he does not see MyRA becoming a reality.
“It comes with a cost when most everybody thinks government spending and involvement in our lives should be reduced. I believe legislators from both parties will fight this,” he said.