“It’s the government borrowing on the backs of lower-income savers,” Pamela Villarreal, a senior fellow at the National Center for Policy Analysis (NCPA), told CNSNews.com.
According to a fact sheet released by the White House, “this new product will be targeted to the many Americans who currently lack access to workplace retirement savings plans.” But Villarreal is not impressed.
“To be honest, I think it’s a total waste. We already have IRAs for people who are working and don’t have availability to a 401(k) plan,” she pointed out.
Obama said that his myRA accounts, which will be established at the Treasury Department by executive order, can be opened for as little as $25 and will provide a guaranteed rate of return for people who don’t currently save for retirement.
But Villarreal said that she cannot recommend the government-run accounts, which are similar but not identical to a Roth IRA, because they force people to invest exclusively in Treasury bonds and provide no other investment options.
She added that Obama’s myRA proposal “is supposed to be modeled after the federal Thrift Savings Plan” (TSP) for federal employees, but noted that even TSP “has more than one option and risk level for people to choose from.”
“The thing that disturbs me about the myRA is when you start your own IRA, you can pretty much pick from a variety of funds, with different risk and return rates. You can pick equity funds, you know, just a mix of them, bond funds. What the myRA does is it basically requires people to purchase a Treasury bond with no other options.
“So until they have $15,000 in the account, that at that time must be rolled over to an IRA, there’s no mention of any choice of funds. Essentially Obama is encouraging people to buy government debt… I almost feel like it’s less about getting people to save than it is about the government wanting just to borrow more money.”
Villarreal also predicted that Obama’s plan to “completely bypass Congress” by going directly to the Treasury Department to set up his myRA program “is going to ruffle a few feathers” on Capitol Hill.
The latest National Retirement Risk Index, published by the Center for Retirement Research at Boston College, found that 53 percent of Americans are already “at risk” of not having enough money to maintain their current living standard after they retire. “Explicitly including health care in the index further drives up the share of households ‘at risk,’” researchers reported.