In early 2014, then president Obama announced during his State of the Union address a new government-sponsored retirement program. It is called myRA, or my retirement account. It also has a play on words (or letters) with IRA, which is an individual retirement account.
The myRA is a type of Roth IRA, which allows after tax dollars to be contributed, just like a Roth IRA. It is geared towards people without a lot of money and those who don’t have employer-sponsored plans.
You can contribute small dollar amounts. Therefore, it would be common for a participant to contribute 25 dollars per paycheck to a myRA account. However, you are limited to $15,000 in the account. Once it reaches this amount, it has to roll over into a private retirement account.
While it is better to save something rather than nothing, good luck to somebody who is planning a retirement based on savings of $15,000. I don’t know how many people will reach the $15,000 limit by contributing a few hundred dollars per year while earning very little interest.
And that is the other catch. It is not like a Roth IRA where you can buy stocks, mutual funds, or other types of investments. In a myRA, you will be put into government bonds, which don’t exactly pay very well right now.
In this article about the myRA plan, a certified financial planner makes the comment that because you are investing in U.S. Treasury bonds, that it is guaranteed, and you will not lose value.
In nominal terms, this is probably correct. But she is obviously not accounting for depreciation of the money. If you are earning 2% interest and consumer prices are going up at 3%, you are losing money in real terms. Your purchasing power is going down.
In the title of this post, I label the myRA as another government boondoggle. But this is really giving it the benefit of the doubt. A boondoggle is just a waste of money or resources. Unfortunately, like many government programs, there may be ill intent on the part of the people who designed it.
They put out the program as a way to invest safely without risk. That is why participants have to buy U.S. government debt. But the politicians and bureaucrats are setting the stage for getting people to buy U.S. government debt in their retirement programs. Whether it is to keep interest rates low, or to confiscate money through inflation, or to eventually default on the debt, or simply to allow massive government spending to go on longer, the motivations by the government officials are to benefit themselves at the expense of others.
This is why all retirement accounts are concerning to a certain degree. I have offered reasons why not to invest in a 401k plan. One of those reasons is that the government could eventually force you to invest a portion in U.S. government debt for “the good of the country”.
As the U.S. national debt gets worse, the government is going to look for new ways of financing its deficits. The politicians and bureaucrats in Washington DC are going to do everything they can to encourage (force?) people to buy into U.S. government bonds.
The good news about this whole myRA plan is that most people are simply ignoring it if they even know about it. According to this article near the end of 2016, there were only about 20,000 participants. Out of a country of 325 million people, that is basically a drop in the ocean. Of course, there are probably a lot of people not participating because they can’t afford to because they have to pay for Obamacare and the massive government spending.
Let’s hope this program continues to go nowhere. But just be warned that as the fiscal problems continue to grow in Washington DC, there are going to be creative ways of trying to extract more money out of you.