By Richard Gregg
When it comes to saving for retirement, millions of Americans do not have a plan to save. Only about half of all workers have access to an employer-based retirement plan, and it is estimated that fewer than one out of 10 eligible workers actually contribute to an IRA. Many of them are lower and middle income workers, part-time workers, and young people, who are missing out on the chance to build a financially secure retirement.
The new myRA (my retirement account), announced by President Obama in his State of the Union address earlier this year, will allow workers to start a retirement savings account with as little as $25, and make manageable contributions each pay period ($5 dollars or more), making it easy for them to safely save and take that savings with them throughout their careers.
myRA will be a Roth IRA account available to anyone who has an annual income of less than $129,000 for individuals and $191,000 for couples. These are the same income limits that apply to Roth IRAs, and they may be adjusted for cost of living in future years. myRA will be for savers who do not have access to an employer-sponsored retirement savings plan. myRA is designed for savers who want an investment with a low opening amount. Savers may transfer their myRAs to private sector Roth IRA retirement accounts at any time. Once a saver’s myRA reaches $15,000 or 30 years, account holders will need to transfer their balances to a private sector retirement account.
Research shows that putting aside a little money with each paycheck is an easy way for people to save without even missing the extra income. Additionally, part-time and temporary workers could potentially benefit from myRA, since they can take their myRA with them when they change jobs or contribute to the account from multiple employers.
Treasury looks forward to launching the myRA program in late-2014. We know, however, that myRA is just one way to encourage saving for a secure retirement. We’d like to hear your thoughts on additional ways to promote long-term savings for more Americans. What channels hold promise to make it quick and easy for Americans to “purchase savings” just like they can purchase a spending product? What can we learn from payments in the retail sector that can inform our efforts to get Americans excited to take action to plan and save for a secure retirement?
Let us know your thoughts.
Richard Gregg is the U.S. Department of the Treasury’s Fiscal Assistant Secretary. To share your thoughts or feedback on this topic with him, please email Combiz.Abdolrahimi@Treasury.gov.