Is myRA myRedundant?
The Obama Administration recently unveiled its myRA program, a federal effort to encourage retirement savings and provide an easy, low-impact way for those who do not participate in a retirement plan to set something aside. But it’s not the first time the administration has embarked on such an effort — and Fiduciary News’ Chris Carosa discusses arguments that it may not be the panacea its proponents hope
Carosa observes that since the initial proposal in 2010, “there has been a vigorous effort to promote the sense of a ‘retirement crisis,’ and cites data from the Government Accountability Office, as well as American College President and CEO Bob Johnson and Pentegra Retirement Services Senior Vice President Pete Swisher that support the notion that there is much to be done to increase retirement savings as well as access to employer-sponsored retirement plans.
Carosa notes that Johnson, as well as Ubiquity Retirement + Savings Director of Government Relations Kate Crowther, contend that myRAs will give access to a retirement savings vehicle to those who did not previously have it, and that they will be secure and easy to establish.
But he notes that the myRA parade also is being rained on by those who argue that they are simply insufficient to provide a financially secure retirement. Among them are Johnson and Pedro M. Silva, a financial advisor at Provo Financial Services Inc. “The problem is that you can’t build wealth for retirement by investing in assets that simply keep pace with inflation. True investing involves sacrificing purchasing power today for increased purchasing power in the future. This plan simply allows people to maintain purchasing power,” says Johnson. “This myRA plan will not do much to close the huge retirement income gap that exists for many Americans. We need to encourage Americans to invest more in equity securities. When you have a long time horizon that is a much better vehicle to accumulate true wealth,” he adds.
Silva went further, telling Carosa, “This looks like a way to get more people to buy government bonds and solve a non-existent problem. Any one of these folks can do a Roth IRA with minimal fees.” Next Generation Trust Services CEO and founder Jaime J. Raskulinecz expressed a similar sentiment, remarking “Any institution that offers a Roth IRA would be more advantageous as there are more investment options available to the contributor.”
Is the myRA welcome government assistance, or government intrusion? Carosa illustrates both schools of thought. And will it succeed? “Time will tell if the myRA survives or ends up going the way of Obama’s 2010 failed effort,” says Carosa.