In late July, the U.S. Department of the Treasury announced that it would be shutting down a program designed to help people who don't have access to workplace savings retirement plans.
The program was called myRA, and it allowed people to save as little as $2 a week (or more, like $200 a week), which would then be invested in retirement savings bonds backed by the U.S. Treasury. Once the consumer's account had $15,000, the money would be rolled into a Roth IRA.
The program began during the Obama administration, opening in late 2015. Last month, the Trump administration announced it had decided the program was too expensive and is shutting it down.
In a press release, U.S. Treasurer Jovita Carranza said: "The myRA program was created to help low to middle income earners start saving for retirement. Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program. Fortunately, ample private sector solutions exist, which resulted in less appeal for myRA. We will be phasing out the myRA program over the coming months. We will be communicating frequently with participants to help facilitate a smooth transition to other investment opportunities."
The Treasury May Have a Point
Since 2015, only 30,000 people have signed up, and 10,000 of those accounts are empty. Still, as financial advisor Jamin Armstead says, perhaps the myRA needed a better public relations campaign.
"In a society where over one-third of the workforce does not have access to an employer sponsored retirement plan, where minorities and the poor are at a distinct employment, income and savings disadvantage, where advocating for retirement savings is a daily headline ... the myRA program could only generate accounts for 20,000 people? This isn't a failure of the program itself, but more so a tragic failure to market the program more effectively, or really, at all," says Armstead, owner of J. Dishon Financial LLC in Surprise, Arizona.
Adam Rust agrees that the marketing was lacking. Rust is director of WiseWage and Reinvestment Partners, a Durham, North Carolina-based nonprofit working to end predatory lending practices. "I never saw myRA appear in a sponsored search result on Google," Rust says.
In any case, Rust is disappointed that the Trump administration didn't give the program more of a chance.
"There is no reason why the Treasury should have canceled this program. It would have spurred more people to save. From a macro viewpoint, it also expanded the demand for Treasury bonds," he says.
Options for People Struggling to Save for Retirement
So is the Treasury correct? Do ample private sector solutions exist?
It may depend on your definition of ample. Still, if you're somebody who doesn't have access to an employer's retirement program, and your income is spotty, you may want to try a few things.
Get a Roth IRA. Consumers who have a myRA were already on the road to getting a Roth IRA.
"If you were contemplating opening a myRA, the Roth IRA is still a great retirement account," Armstead says.
So if you're one of the 20,000 people with a myRA, and you already had a decent amount saved, like over $1,000, you probably won't have trouble finding an online brokerage that will allow you to set up a Roth IRA. From there, you'll transfer your funds from your myRA into the Roth IRA.
"There won't be a penalty because the funds are being transferred to another qualified retirement account," Armstead says.
And if you don't have a myRA, and you'd like a Roth IRA? Well, anyone can get one. The barrier for some consumers is that usually an investment firm requires a minimum deposit of $1,000, and then you may have to put in as much as $100 a month. Not everyone can swing that. Still, you may find a firm that will allow you to pay less than $100 a month, but perhaps with a small monthly fee, like $3.
But if you think you can pay $100 a month, then you could start saving $100 a month in a separate savings account; in 10 months, you'd have enough to make a deposit into a Roth IRA and then just continue putting in $100 (or possibly less) every month.
Look into mutual funds. As you probably know, if you invest in mutual funds, you and other investors are pooling money together and investing in stocks, bonds and other similar assets. You may want to try that route, says Joseph Montanaro, a certified financial planner for USAA, a financial services company for the military and their families.
"A mutual fund can be a sensible option for someone that's just launching their retirement savings program," Montanaro says. "There are mutual fund families, including USAA, that allow you to start an IRA for as little as $500, or even less, if you set up an automatic investment of as little as $50 per month."
Consider bonds. Montanaro suggests this. "Another low-cost investment option that more closely matches the myRA would be the Treasury's I-bonds -- you can buy those for as little as $25 and have the same government guarantee -- and protect against loss of purchasing power. Of course, you might miss out on some tax benefits going this route."
He is referring to the fact that the interest your savings bonds earn will be subject to federal income tax (but not state or local taxes).
If you do go this route, you'd do well to buy the bonds through the Treasury's website, Treasury Direct. If you go through an online broker, for instance, you'll have to pay a fee.
Still, the myRA was simple to set up and use. And it was certainly affordable, considering the weekly minimum payment was only $2 (granted, that won't get you a cushy retirement, but the idea was that consumers would eventually lift that number to a more ambitious one). Now that option is gone.
Critics like Rust and Armstead are not happy.
"We have a tax system that doesn't incentivize lower-income households to save for retirement," Rust says. "MyRA addressed the needs among lower-income households for liquidity. Research says that this group has less tolerance for risk, so again, myRA was a good fit to that problem."
Armstead is even less charitable. "Although the myRA is merely a starter account, the fact remains loud and clear: If you are poor, the Trump administration is not your advocate," he says. "Do not expect this current administration to throw you a lifeline in any capacity."
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