Unfortunately, many people still do not have a retirement savings plan such as a pension or 401 (k). As has been previously noted in this column, such does not bode well for future retirees, many of whom will not have sufficient funds for retirement.
If you are in this group, there is good news. And it comes courtesy of an unlikely source, the U.S. Treasury.
A new account, named myRA, is considered a starter savings plan. myRA is backed by the Treasury and does not charge any fees. Individuals can make direct payments into the account.
A pilot program began in December. But it is now open to anyone who has direct deposit capability for their paychecks.
The program is aimed at low-and middle-income people who currently do not have access to a retirement plan. This may be because they are working part-time and are not eligible for participation. Or they may be employed by a small firm that does not offer retirement plans to workers.
In many ways, myRA works like a Roth IRA. After-tax income is invested in the plan, and earnings can be withdrawn tax free at retirement. The amount that has been invested in the account can be withdrawn without penalty at any time.
To be eligible to invest in myRA, an individual can earn up to $129,000 and a married couple may earn no more than $191,000. And there is no risk of default since the account is backed by the U.S. government.
The major downside to myRA is that funds can be invested only in government bonds. While risk free, the returns are low. The account earns the same rate as the Thrift Savings Plan offered to federal workers. In 2013, the plan earned less than 2 percent.
Another disadvantage is a limitation on the amount that may be accumulated in the account. Savers can invest up to $5,000 per year. But the maximum amount that may be accumulated is $15,000. Once the total reaches this level, it must be rolled over into a private-sector Roth IRA.
This is a good starting point in providing an avenue for people to save for retirement. But a great deal more needs to be done to motivate Americans to provide for retirement.
Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business dean. Email him at email@example.com.