In President Barack Obama’s State of the Union Address on Tuesday night, he introduced a proposed “MyRA” retirement savings account that would invest in government bonds, providing a “starter plan” for workers who do not have access to a 401(k) plan. Once workers’ “MyRA” plans reached the maximum balance of $15,000, the money would have to be rolled over into a private-sector Roth IRA.
While the idea of providing easier ways to save for lower- and middle-income workers is a noble one, we can’t help but draw some worrisome similarities between the structure of this new plan, and the complexities that have caused scandal across our financial and retirement plan markets in recent years.
The key questions we have at this stage of the “MyRA” proposal, and that we’d like to investigate further, include:
- Conflicts of Interest. Is the U.S. Government planning to use a Roth-IRA type of savings account to support the Government’s bonds? (If so, is this not an inherent conflict of interest, and eerily similar to how Enron set up its stock?)
- Transparency. President Obama referenced a statistic that 32% of workers do not have access to employer retirement plans. Yet, these workers are able to open and contribute to a private-sector Roth IRA. This IRA works exactly like the proposed “MyRA,” except that the “MyRA” program is limited only to bonds. Is the government’s true motive simply to have control over workers’ assets?
- Education. The “MyRA” plan assumes, first, that a worker will voluntarily entrust their money to the Government. But who will help workers put this money to work for them? In this scenario, is the Government really acting as a trusted steward of these workers’ hard-earned monies?
- Competition with the Private Sector. Does this plan support or compete with U.S. businesses? What effect might it have on the private sector as a whole?
What are your reactions to the President’s “MyRA” proposal? Post your comments here, or chat with us on Twitter, at @RolandCriss.
It would be great if we could eliminate the 401k and raise the contribution limits on IRAs, somehow preserving a way to keep employee paycheck deductions and corporate match. However, there are some big players with large pockets (ie bipartisan campaign contributors) that would lose out with this new system. The cold reality is – its not going to happen.
Once again we are witness to the new “no brainer”. That’s Obama (and advisors) proposing what sounds good but has little or no merit, was not thoroughly investigated before proposal and has the potential to create far more harm than good. to any worker who would consider this a plus, I suggest you consider this a MyRAther put my money in my mattress.