The government has decided to wind down the
myRA program, an Obama-era initiative aimed at small retirement savers.
The
Treasury Department cited cost as the reason to end the myRA program. "Demand for and investment in the myRA program has been
extremely low," it said in a statement. "American taxpayers have paid nearly $70 million to manage the program since 2014." About 20,000 accounts have been opened since 2015, and the program had a total of $34 million in assets.
(More: President Obama's myRA retirement plan slow to gain traction)
The program was available to workers with no employer-sponsored retirement plan, such as a 401(k), and with little money to invest. It allowed workers to have part of their pay deposited into a tax-deferred Roth IRA that invests in U.S. government bonds. Workers could start investments with as little as $25 and add payroll contributions as low as $5. Once a worker had accumulated $15,000, she would have to move it to a private-sector Roth IRA.
"The myRA program was created to help low to middle income earners start saving for retirement," said Jovita Carranza, U.S. Treasurer, in a statement. "Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program ... We will be communicating frequently with participants to help facilitate a smooth transition to other investment opportunities."
Participants are encouraged to visit
myRA.gov for additional information or to call myRA customer support with any questions.
Savings advocates had mixed feelings about the program's demise, said Greg McBride, chief financial analyst for Bankrate.com. "The myRA program was never going to be the foundation of one's retirement security, but it very likely could have represented the all-important first step in saving for retirement. "Without this indoctrination into retirement savings, many lower income Americans won't take other steps to actively save for their retirement, such as opening a Roth IRA."
A Treasury spokesperson said, "Retirement savers have options in the private sector that offer no account maintenance fees, no minimum balance and safe investment opportunities."
But savings experts were hard-pressed to name options that fit all three criteria. "You could go to a bank and open an IRA, but you'll earn 0.01%," said Diane Oakley, executive director of the National Institute on Retirement Security. "At that rate, you'll double your money in 720 years."
As for cost, current retirement plan contributions, which are made mainly by the wealthy, cost the government about $700 billion a year in tax revenue. The cost to administer the myRA program was tiny in comparison. "We're taking away the one place where the working person might be able to put a little bit away for retirement," Ms. Oakley said.
Mr. McBride noted that the low level of contributions to the plan was the cause of its demise. "The myRA program was good in theory — opening up retirement savings to those without workplace plans and who otherwise wouldn't have saved — but the lack of uptake and scale ultimately doomed it."
(More: Advisers skeptical about Obama's myRA proposal)
AARP was also disappointed in the move. "We've been supportive of expanding retirement savings opportunities, particularly for the 55 million workers who don't have access to a retirement plan through an employer," said Cristina Martin Firvida, AARP's director of financial security. "And, more broadly, we're troubled by the bigger picture when we hear of a number of retirement policies being curtailed or modified in some way, such as the fiduciary rule."
In addition, the Trump administration last month signed legislation
killing state auto-IRA rules, another Obama-era initiative that would allow states to set up retirement plans for workers. The regulation created a safe harbor under which states could establish automatic-enrollment, payroll-deduction individual retirement accounts for private-sector workers who don't have access to a retirement plan through their employer. Five states — California, Connecticut, Illinois, Maryland and Oregon — have passed legislation to create such auto-IRA programs.
