MyRA - Individual Retirement Savings

MyRA refers to individual retirement savings which allows workers to save through payroll deductions. The money accumulated in such accounts qualifies to earn interest and dividends paid only after retirement. It is important to note that the payments upon retirement will be tax free. In order to enroll for a MyRA, a worker goes through his employer to redirect MyRA deductions to the subsequent account. The only requirement is $25 at the start but the monthly deductions could be as low as $7. This program serves to benefit the young working population in their 20s who still have more working years ahead. Asides from the young, the MyRA favors middle to low income earners who will contribute little amounts to save. This is because the MyRA invests in government bonds which is not very safe to invest a lot in.

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The MyRA may be a good option for parts of the working population but at the same time it has some cons. Among them is the unreliability of investments in bonds especially due to the long timelines offered. The MyRA is also available for a section of employees whose employers have accepted to pay their deductions, thus disadvantageous if the employer is non conversant with such. The other drawback comes with the stipulations of the MyRA account which requires a 30 year existence and a minimum 15,000 dollar savings balance and upon achieving this, the account is converted automatically into a private IRA. The advantage comes in due to the passivity of the accountholder since he is not mandated to do anything involving fund management just like the 401(k).

Returns from the MyRA investment can be compared to the rates of the G Fund over the past which have ranged from 1.89% to 5.54%. This is considerably low compared to other retirement investment options such as buying stocks. The greatest selling point of the MyRA however is the zero charges for fund maintenance and the lesser risks but there is always a catch. While the MyRA seems effective in the short term, considering the long term will prove costly. For the young population, a variety of alternatives are available and in fact offer better savings options than the MyRA which just seems like a rebranded version of the initial IRA by the government.

Upon evaluation of the MyRA policy, it is evident that its efficiency is questionable. The worker requires to accumulate a minimum of $15,000 which will take a long time for a low income earner. In return, upon retirement, the MyRA account funds invested in bonds are bound to attract a fluctuating interest between 1.89% and 5.54%. This policy proves more costly compared to the expected benefits thus inefficient. The MyRA is however equitable and non-discriminative based on income earned since the returns to be paid will be of similar percentage all through. It is arguable that the MyRA was devised in order to provide a better alternative to the already existing retirement saving schemes. MyRA fails to achieve its goal in providing a better platform thus its effectiveness is questionable.

There is a wide variety of alternatives for the MyRA including company-sponsored retirement plans involving risk free investment options undertaken by the company on behalf of the employees. For these, the money is invested in bulk and there is a higher chance of better returns over a small interval of time. The youth are also advised to inquire options offered by the banks and investment firms for individual policies which are certainly more productive than the MyRA.

References

Kraft et al, (2015) Public Policy: Politics, Analysis and Alternatives. Sage Press

BD Bernheim, (1997) The adequacy of Personal Retirement saving: Issues and Options. Hoover Institute Press.

S Kitao, (2010) Individual Retirement Accounts, saving and Labor Supply. Elsevier

http://www.ncpa.org/pub/ba807