What the Heck is a myRA?

by Michael on Jan 28, 2014

Photo of the White House

Here’s an interesting tidbit from President Obama’s State of the Union address:

“[T]omorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA.

It’s a new savings bond that encourages folks to build a nest egg. myRA guarantees a decent return with no risk of losing what you put in.”

Sounds like a catchy name, but it’s basically just a new type of savings bond?

The White House’s State of the Union fact sheet offers a few more details. It leads off with this pitch about the need to encourage people to save:

“Workers must have a place to invest their hard-earned savings that provides an appropriate balance of risk and return, and many private sector providers do not offer retirement savings options tailored to smaller balance savers. Our retirement system should help these potential savers and encourage them to begin building their retirement security.”

I agree. We need to encourage people to save early and often. However… While it’s true that many private sector providers don’t cater to small investors, it’s worth noting that many of them actually do a good job of serving the little guy.

Related: How Much to Save for Retirement?

It continues:

“The President is using his executive authority to create “myRA” (my Retirement Account) – a new simple, safe and affordable ‘starter’ retirement savings account that will be available through employers and help millions of Americans save for retirement. This savings account would be offered through a familiar Roth IRA Account and, like savings bonds, would be backed by the U.S. government.”

Oh, I see. It’s a “savings account” that will reside in a Roth IRA and is backed by the government like a savings bond. Clear as mud. Right?

I guess we’ll have to wait for more details. But don’t get your hopes up about that “decent return.” The “no risk” promise that it’s coupled with is going to put an upper limit on what you can reasonably expect.

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