Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
The Redundant MyRA
The State of Union address always provides a unique perspective into the political thought process. You get to see the attempted appeasement of the social classes as the President lays out his thoughts for change on the year. This year’s address was no different. Topics ranged from education to higher wages. One that struck a chord in the retirement area was the MyRA.
The purpose of the MyRA is to offer a retirement account to workers who aren’t offered one through work. It sounds like a great idea, a way to fill the gap where a 401k or pension should be. Except it doesn’t!
Instead, the MyRA allows an employee to contribute to a Roth IRA but that money can only be invested in short-term Treasury bonds. Well, I can do that already with a Roth IRA and get better investment choices too. Same goes for a traditional IRA and the immediate tax deduction that comes with it. By the way, T-bonds are a terrible way to grow retirement savings.
Usually when you try to make something better, it should be an improvement on what already exists. Just saying. This does nothing to improve access to retirement accounts. Anyone with income has this option. The problem is getting people to actually use them.
A more worthy change would bump up the current IRA limits for everyone without a work plan to those allowed in 401k’s. Another would be auto enrollment. The worker would have to opt out to not contribute. There’s been consistent talk about switching 4o1k’s to auto enrollment to get people to save. A more drastic and controversial change would enforce a minimum contribution as well.
I suspect this could also be the first of many steps toward universal retirement accounts in a similar vein as health care.