On Friday the 28th of July, the Trump administration announced that they’re shutting down the Obama-era retirement program called ‘myRA’. The program was aimed at allowing mainly low-income earners, and also those who don’t have a savings program at their work a chance to save for retirement. The Treasury announced the program termination because the low participation in the program doesn’t justify the cost.
Since its launch in late 2014, about 30,000 Americans have contributed a total of $34 million to the program. The plan was an option for households that didn’t have access to an employer-sponsored retirement plan, like a 401k. About 20,000 accounts have an average balance of $500, and the owners of 10,000 accounts made no contributions at all.
The Treasury said it has cost $70 million to manage the program over the years. Including server costs and promotion, which was likely to cost an additional $10 million annually going forward.
Under the program, contributions were invested in U.S. Treasury savings bonds. Rather than a portfolio of stocks and bonds that typically yield higher returns over time. Same as a regular IRA program, savers could contribute up to $5,500 a year, or $6,500 for those 50 and older. A maximum of $15,000 could be contributed; at that point, the money would be rolled over to a private-sector retirement account.
Participants were notified by email on the morning of Friday the 28th that the Treasury’s myRA program will be phased out over the next few months. myRA savers will receive information about rolling their savings to a Roth IRA. A Roth IRA, unlike a traditional IRA, makes contributions with after-tax dollars, and withdrawals are tax-free.
So even though President Obama’s myRA is about to end, there is a bright side. These same savers, including low-income earners the program was aimed at helping, still have options that can bring them greater returns. As of August 2017, the stock market is at all-time highs, so savers should look at investment options that are best suited for their incomes and long-term goals.