Family Finances

Americans Need More Savings Options, Not Fewer

July 28, 2017  • Ida Rademacher & Jeremy Smith

Today, the Treasury Department announced that it would end the myRA program, an Obama administration initiative that offered simple, no-cost retirement savings accounts. The plan, launched at the end of 2015, was designed to reach workers whose employers do not offer retirement plans at work. In announcing today’s decision, Treasury cited the program’s costs and low take-up rate as the reasons for shuttering the program. Like many organizations interested in expanding access to affordable savings choices, we hoped that the program would reach more people, but closing a program that is less than two years old is a lost opportunity.

myRA was never envisioned as the solution to the retirement crisis. Rather, it was seen as a way to put people on the path to financial security. For those new to savings, it offered many attractive features: no minimum balances, no fees, simple and safe investments (Treasury bonds that were guaranteed not to lose value), the option for direct deposit or a transfer from a bank account. Simple, safe, and easy to access. Moreover, myRA was designed to complement existing market options, since a participant could choose a private IRA at any point, and if they did not, the account would be rolled over to the private sector once balances reached $15,000. The idea was to get small savers into the system and then pass them into the market once they built some savings.

While the program only drew 30,000 participants, it was not heavily marketed. And those savers who did use the accounts averaged $500 in savings.  Like many observers, we at Aspen FSP saw myRA as a program that might meet emergency or other savings needs. This could have been a promising start, one that allowed the financial industry and other retirement experts to learn valuable lessons about how to reach people outside of the traditional employer channels. Given the rapid rise of gig and other contingent work arrangements, this is a problem that needs to be solved. And given the scope of the problem – nearly half of private sector workers, or 55 million people lack access to a retirement plan at work — we need to sustain more experiments, in the public and the private sector.