The president’s myRA, the new account for people who want to save for retirement, is something of a clone of an Australian plan I profiled in a segment last year.
The Aussie plan sounded like a real fix for our retirement problems. But the myRA has some big differences that I hope are changed in the future.
The strong points…
The myRA allows you to contribute as little as $25 to start a plan and then as little as $5 per contribution. That will allow a lot of low-wage earners to do something. Not enough, obviously, but something.
You can withdraw your savings anytime you need them without a penalty.
Withdrawals, whether early or in retirement, are tax-free because the myRA acts as Roth as well. You contribute after-tax money and draw it out tax-free. That’s a good deal.
The myRA has no fees of any kind. That’s refreshing.
And your money is invested in guaranteed Treasurys. You don’ t make much but you also don’t lose anything. As a dyed-in-the-wool bond guy I know over time this works. Better than swinging for the fences.
But here come the problems that I think can be easily fixed.
Only individuals making less than $121,000 and couples making less than $191,000 can participate. I’m not sure why everyone couldn’t take advantage of this plan. Don’t people who make $200,000 have to save for retirement, too?
And the max you can have in an account is $15,000. Then it has to go into a traditional IRA. Huh? Here’s a great way to get around the biggest objection to retirement accounts – no withdrawal penalty – and they let you put only $15,000 in it? I don’t get it.
Oh, and it’s a one-time deal. Once you hit the $15,000, you can’t do another.
We have a mountain of a retirement funding issue in this country, and we should be doing everything possible to put aside as much as possible. This makes no sense at all.
I like the idea of putting so little in and getting it back when you need it, but why can’t this be a permanent fix for folks who don’t have any other option?
I have a feeling as the boomer retirement funding disaster unravels, we will see this program expanded in many ways.
By the way, the Aussie form of this plan is mandatory.Now that’s a plan that has to work.