The Asset Building Program released a paper today examining the potential of the Obama Administration’s myRA proposal to provide a meaningful savings opportunity for low- and middle-income Americans. The paper, “Solving the Retirement Puzzle: The Potential of myRAs to Build a Personal Safety Net,” examines the myRA program within the context of other recent policy proposals to address the looming retirement crisis. While many of the recent proposals have promise, they almost uniformly lack one key element to achieving widespread retirement security among low- and middle-income workers: supporting access to flexible resources that can be tapped in an emergency. This is where the myRA proposal stands out: it permits flexible withdrawals.
Americans’ lack of accessible savings endangers not only a family’s short-term financial security by increasing reliance on debt, but also long-term retirement security by forcing families to draw down long-term savings to meet immediate needs. About one-fourth of all households with a DC retirement plan will use some or all of their retirement assets for non-retirement needs. This is a troubling statistic, and one that clearly shows the imperative for federal policy to address the widespread lack of short-term savings as part of successful efforts to support retirement savings.
The myRA program is unique among the recent retirement savings proposals in that it is built around an accessible Roth IRA structure that permits unrestricted withdrawals of contributions at any time for any purpose. This is a positive feature of the proposal. But weaknesses in the other ways the myRA proposal is currently structured threaten to limit the program’s impact. MyRAs are not universally accessible to workers and do not allow built-in automation for employee participation, among other weaknesses.
To draw out the existing strengths of the myRA proposal and to improve upon the weaknesses, the authors of the paper propose a number of concrete ways to transform the myRA proposal from a retirement-savings program of minimal impact to a lifetime-savings program of great significance.