With every story or study on retirement savings, I hope the news will be better. It usually isn’t.
Overall, most of us aren’t saving enough — or any! — for our retirement.
And things aren’t likely to get better. In fact, Uncle Sam is shutting down a program created just three years ago to encourage lower-income earners to save for retirement.
The U.S. Department of the Treasury announced on Friday, July 28, that it soon will wind down the myRA program.
Broadening retirement savings: The name is short for “my retirement account” and was a play on IRA in an attempt to personalize the new savings option.
It was aimed at lower-earning workers who might have felt more traditional retirement plans were beyond their financial reach. With a myRA, a person could accumulate up to $15,000 with interest on the money tax-free.
Workers could contribute to a myRA through workplace direct deposit from their paychecks, by contributing directly via recurring or one-time transfers from checking or savings accounts or by having part or all of their federal tax refund at filing time sent to the account.
When a myRA exceeded the account limit, the funds could be transferred to a private-sector Roth IRA.
Targeted savings didn’t hit target: The myRA was created in 2014 and officially opened for business on Nov. 4, 2015. In making the announcement that day that eligible workers could contribute to myRAs, then Treasury Secretary Jacob Lew emphasized that the accounts reduced many barriers that kept people from saving.
“You don’t have to worry about fees or minimum requirements, you don’t have to worry about investment options, you don’t have to worry about losing money, and if there’s an emergency, you can have access to the money you put away at any time,” Lew said in touting myRA attributes back then.
Unfortunately for the program, Lew’s sales pitch didn’t convince enough folks.
In last week’s announcement, the Treasury Department said that a thorough review of myRA found the program was not cost effective.
Demand for and investment in the myRAs have been extremely low, according to Treasury, while nearly $70 million in federal money has been spent since 2014 to manage the program. Officials didn’t say how many myRAs were opened or the amount in those accounts.
“The myRA program was created to help low to middle income earners start saving for retirement. Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program,” said U.S. Treasurer Jovita Carranza in announcing the impending end of myRAs.
Winding down the accounts: The program will be phased out in the coming months, Carranza said.
As part of that process, the program has is no longer accepting new enrollments. However, existing accounts remain open and accessible. For now.
Participants will be getting notices from Treasury with details of what will happen.
“Fortunately, ample private sector solutions exist,” added Carranza, to which myRA owners can transition. These include retirement saving options that offer no account maintenance fees, no minimum balance and safe investment opportunities.
If you have a myRA and don’t want to wait for an official letter, you can check out the plan’s website, which has a Q&A format to help answer account owners’ concerns.
The one thing Treasury would like all myRA owners to do ASAP is to log in to their accounts to make sure the contact information is complete and up to date. This will help facilitate receipt of future instructions about the end of the myRA program.
If you prefer to call, contact customer service at (855) 406-6972; (855) 408-6972 for hearing impaired account owners; or (414) 365-9616 if you’re calling from outside the United States. Phone lines are open Monday through Friday, from 8 a.m. to 8 p.m. Eastern Time.
You also might find these items of interest:
- 2017 inflation-adjusted retirement plan limits
- When early retirement plan withdrawals are penalty free
- Millennials’ participation in tax-favored workplace retirement plans improves, but still lags other generations
