Savings Bonds for myRA

At Work, Retirement 5 comments

Treasury Sets Up Savings Bonds for Retirement Savings Program

On December 12, 2014, the Treasury’s Bureau of the Fiscal Service issued a final rule, effective December 15, 2014, establishing the electronic retirement savings bonds needed for implementation of the new retirement savings program first described in the President’s State of the Union address in January 2014. The rule was issued in response to the President’s January 29, 2014, Memorandum directing the Secretary of the Treasury to develop a new retirement savings security for “new and small-dollar savers.” While the final rule does not refer specifically to “myRA,” the terms and conditions of the program described in the rule match the characteristics of “myRA” as it has been discussed by the Administration.

Participants in the program will be able to establish Roth individual retirement accounts (IRAs) that will be invested exclusively in the new savings bonds. The bonds will earn interest at a rate previously available only to federal employees invested in the Government Securities Investment Fund of their Thrift Savings Plan. According to the Treasury, that fund earned an average annual return of 3.39% in the period from December 2003 to 2013. Participation in the program can continue until the IRA account balance reaches $15,000 or 30 years since participation begins, whichever occurs first.

The Fiscal Service’s final rule is available here.

The Treasury’s myRA webpage is available here, including information for employers.

Summary prepared by Aon

There is one problem here and that is encouraging people to save and only invest in a government bond fund. Those returns are not going to be sufficient to accumulate assets and outpace inflation.

5 comments

  1. Well, maybe you can use MyRA to access that fund as part of your fixed income portfolio, however, when you go to the site, it states:

    “… NOTE: Currently, you can only fund your myRA account by direct deposit through an employer, especially through an employer that participates in the myRA program. However, you can fund your myRA account through any employer as long as they offer direct deposit and they are able to set up a portion to be directed to your myRA account. In the near future, the U.S. Treasury will be making other methods available for you to contribute to your myRA account. …”

    So much for that, as few, if any employers will be interested in this program or in establishing the functionality to both effect the deduction and transmit the funds to a financial institution (with the potential liability). Do you get to mandate that your employer participate? If not, you have to wonder what they mean when they say “especially through an employer that participates in the myRA program

    Separately, even if I could access the program to take advantage of the government-guaranteed rate, note that the site also states:

    “… Savers can contribute to their myRA accounts as little as a few dollars a month up to $5,500 per year (or $6,500 per year for individuals who will be 50 years of age or older at the end of the year).* The myRA account can have a maximum balance of $15,000 or a lower balance for up to 30 years, When either of these limits is reached, savings will have to be rolled over (transferred) into a private-sector Roth IRA. …”

    So, how far will $15,000 get you … in terms of My Retirement Account (MyRA).

    Who shouldered the implementation costs to create this crap? Oh yes, the taxpayers.

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  2. According to the Treasury, that fund earned an average annual return of 3.39% in the period from December 2003 to 2013.
    Over the same period, the inflation rate averaged 2.39%.
    I can’t say a 1% real return on investment will be much of an incentive to save.

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