Death of a Good Retirement Savings Program

///Death of a Good Retirement Savings Program

This post was written by CPPP Economic Opportunity Policy Intern Anna Crockett

Last week the U.S. Treasury Department announced that it is ending myRA, an innovative retirement savings program created during the Obama administration and designed to help low-income workers save. We are disappointed that the Treasury Department decided to eliminate the program, which helped thousands of Americans begin the process of saving for retirement.

In addition to maintaining one’s standard of living, retirement savings is also important to cover long-term care costs, such as nursing home facilities. However, many Texas fall short in saving adequately for retirement. In Texas, only 50 percent of full-time, full-year private sector workers age 18-64 are covered by a workplace retirement savings plan, and it’s estimated that the total average defined contribution account balance of Texas private sector workers age 21-64 is only $32,028.

Created in 2015, the MyRA program specifically supported workers who did not have employer-sponsored retirement plans and who needed an easy way to start saving. Participants could contribute to their account through automatic payroll deduction or electronic transfers from personal bank accounts. There were no minimum deposits or fees, and withdrawals were tax- and penalty-free.

Employees could contribute a maximum of $5,500 (or $6,500 if over the age of 50), and once the amount in their myRA met the $15,000 maximum, account holders’ savings could be rolled over into a traditional Roth IRA. A Roth IRA is a retirement savings account that differs from a traditional individual retirement account in several respects—primarily in that withdrawals from Roth IRAs are not taxed.

One of the other appealing aspects of the program was that participants were protected from losing money. Savings were tied to government bonds and earned about two percent in interest.

A streamlined, low-risk program is exactly what many Americans need in order to begin saving for retirement. It’s a shame that this market-based solution will no longer be available to the many Americans who lack access to retirement savings programs.

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