President Obama's MyRA program, which kicked off in January, drew skeptics from the start. Now the National Center for Policy Analysis has joined the chorus, saying MyRA isn't worth bothering with, compared to what's already out there.
The NCPA points out that the new plan isn't geared up for the level of returns that draws most folks to the stock market, and that it offers a far more restricted investment choice than standard IRAs.
Not only that, but MyRA accounts can only be held for 30 years or until they reach a balance of $15,000, at which time they must be rolled over into a private IRA. So, it says, why not just go the IRA route now?
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Roth IRAs, of course, offer choices: stocks, bonds, mutual funds and even cash. The MyRA is restricted to Treasury bonds, which makes its rate of return comparable to the Government Securities Investment Fund (G) in the Federal Thrift Savings Plan used by federal employees. The average annual rate of return of the G fund has ranged from 1.89 percent to 5.54 percent since 1987, while a number of index funds have done better over the same period, the NCPA says.
The organization also argues that the low rate of return actually penalizes young investors by locking them into something that won't grow all that much over the years.
In addition, if investors leave their money in a MyRA for the whole 30 years, all they'll have is $15,000 or less, which certainly isn't enough to retire on, the NCPA said.
The MyRA offers some advantages that could, despite NCPA's criticisms, pay off, particularly for low-income workers with few other options.
For one thing, at least those long-term holders of MyRAs will have something that they might not otherwise have at the end of 30 years, were it not for the low barriers to entry that a MyRA provides.
Although workers could certainly try to negotiate waivers of the amount required to open a Roth IRA — usually between $1,000 and $3,000 — or the monthly deposit requirements — which can be upwards of $200 — the fact that they don't have to is a plus.
Being able to open a MyRA for as little as $25 to get started, put in just a $7-per-month contribution and depend on the employer to deduct the money from an employee's pay and direct it to the account sounds like a small blessing for many.
They can also just "set it and forget it," something that's likely to appeal to people who probably haven't got a great deal of time to spend worrying about the logistics of a retirement account.
In addition, there are no fees involved with the MyRA for fund maintenance — allowing whatever savings its owner manages to accumulate without regular deductions for the costs involved with standard retirement products.
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