I was interested to learn about Obama's MyRA program because I have two children who are at the beginning stages of their careers. Neither of my children have access to a company-sponsored retirement plan. A lot of commentators have been critical about the plan, arguing it's not going to provide a decent return on retirement money. According to a Washington Post article, the MyRA may be a modest step to help people save for retirement. As a parent of one spender and one saver, I am extremely optimistic about what the plan could do for my son, the spender. I'm not as much worried about the return on his money as much as the idea of making saving for retirement more convenient and effortless for those without a 401(k) plan.
Building up to a Roth IRA
According to experts, the MyRA would basically be a starter retirement savings account. After people accumulated $15,000, they would transfer the money into a Roth IRA account. Just like a Roth IRA, the contributions could be taken out again because they are made with after-tax dollars. I think my son is more likely to save if the money is automatically taken out of his paycheck by him employer. Employees are used to money being withheld for everything from health insurance premiums to Social Security. People who have access to 401(k) plans can automate their retirement savings with a lot of success.
Gaining investment knowledge
If my son was able to have money automatically deducted from his paycheck and put into a MyRA plan, it might take him some time to save up $15,000. By the time he was able to roll the money over to a Roth IRA, he should have more maturity and understanding of all the investment options. When I was in my 30s, I saved up a lot of money in my 401(k) plan. When I had the chance move my money from a 401(k) into a Rollover IRA due to a change in employment, I welcomed the chance to control my own investments. However, I would not have been ready in my 20s or early 30s to trade stocks.
Meeting people where they are
I also like the MyRA because it provides a safer alternative to the risky stock market for someone like my son who is "risk averse." After living through the Great Recession and hearing horror stories of retirement accounts that dwindled down to almost nothing, a lot of younger Gen-Y'ers and Gen-Z'ers are skeptical about the stock market. I rather my son save into something similar to the government's Thrift Savings Plan than save nothing at all due to unrealistic fears.
I am not an expert on monetary policy, but I would like to see the economy get back to normal. Earlier this year, an article by Forbes posed the question of who would buy treasury bonds as the Fed embarks on its tapering journey. If enough people save for retirement through the MyRA program, it seem as though they would essentially be taking over the job of buying the government's debt. Some people are paranoid that the government could seize people's assets. Is it possible the MyRA is actually a small win-win instead of a giant conspiracy? It helps young people become better savers while encouraging individuals to invest in treasury bonds. If all goes well, my son would roll over his $15,000 plus interest into a Roth IRA account where he could diversify his portfolio. If the MyRA is just part of a conspiracy for world dominance and control, I think we all have a lot more to worry about than having enough money for retirement.
More from this contributor:
- Investing Education
- Retirement Benefits
- Roth IRA