Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s. That’s why … I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA.
— President Barack Obama, State of the Union, January 28, 2014
It is a fact that most Americans, namely low-income citizens, have not and do not adequately save for retirement. I fear that we are becoming an entitlement nation where we shift personal responsibility to someone other than the man or woman in the mirror. As we discussed in Lesson #36, Social Security is a fleeting reality for many of us. In thirty or forty years, it may be a figment of a distant past. It’s YOUR responsibility to prepare yourself and your family for retirement. It is NOT the government’s responsibility to provide for you in your retirement years. Given that many of you will live up to twenty and some thirty years after your retire, it is imperative that you begin to take advantage of any opportunity provided to save for your golden years.
President Obama would like to help American save for retirement. Listen to him describe the initiative in his own words.
Obama Launches MyRA Retirement Account Initiative
Education:
The MyRA Retirement Savings Plan
|
Advantages |
Disadvantages |
| Low contribution amounts (as low as $5) | Low rate of return (rate tied to US Treasury Securities) |
| Contribution directly from your paycheck | Opportunity costs |
| Safe, no risk | Accounts will solely invest in government savings bonds |
| Government guarantee against loss of principal | Contributions limited to $5,500 per year |
| Great for low-income taxpayers | It will not be enough for retirement – additional retirement assets will be needed |
| May qualify some taxpayers for Retirement Savings Tax Credit | Potential automatic enrollment for workers |
| Function like a Roth IRA (invest after-tax dollars and withdraw the money in retirement tax-free) | |
| Portability (workers will be able to keep the accounts when they switch jobs or contribute to the same account from multiple part-time jobs) | |
| Tax-Free distribution of original contributions | |
| No Fees |
Practical Example:
With an average 2% interest rate, for example, a worker contributing $100 a month would accumulate around $6,300 in savings after five years, including around $300 in interest.
Resources:
Whitehouse.gov – For the latest information about the MyRA Savings Plan.
Important terms from this lesson:
|
Term |
Definition |
| MyRA Savings Plan | MyRA is a new type of savings account for Americans who don’t have access to an employer-sponsored retirement savings plan. |
Action Step: Read the WhiteHouse Fact Sheet
Education and Action 