WASHINGTON – President Obama wasted little time implementing one of the major initiatives he proposed during his State of the Union address – a retirement savings plan aimed at workers who don’t qualify for pension benefits.
The president sidestepped Congress to sign an executive order creating myRA, which permits workers to have money deducted tax-free from their paychecks and invested in bonds. The accumulated funds will then be available to the worker when he or she retires.
“It’s a new savings bond that encourages folks to build a nest egg,” Obama said in the State of the Union. “MyRA guarantees a decent return with no risk of losing what you put in.”
Republicans have had practically nothing to say about the initiative even though it was executed via executive order, a process that GOP lawmakers maintain Obama uses to excess in general defiance of the Constitution. But the new program has failed to draw objections from lawmakers.
Even without the Republican denouncement, myRA has attracted only tepid enthusiasm from organizations that might normally be expected to hail a new benefit for future retirees.
A. Barry Rand, the chief executive officer of AARP, said the creation of starter retirement accounts like myRA “could help encourage more private retirement savings for those without employer plans.” But he further noted the program could prove even more effective if workers were provided with more options and enhanced investor protections.
“It’s not what I would describe as an earth-shattering move,” said Brian Graff, executive director and chief executive officer of the American Society of Pension Professionals & Actuaries. “It’s going to help some people without a plan save for retirement.”
But that in itself covers a lot of territory. Most American workers don’t have a pension benefit related to their jobs. Social Security was intended to supplement retirement income and, despite advances, the monthly check doesn’t generally meet a retiree’s needs.
Obama in the past voiced support for automatic employee enrollment in employer-run Individual Retirement Accounts – IRAs – but opted instead for the voluntary plan. The administration has long sought to increase savings, citing a number of statistics establishing that American workers aren’t properly prepared for retirement.
The Center for Retirement Research at Boston College found that 53 percent of households are at risk of not having enough invested money to maintain their living standards in retirement. The accounting firm of Ernst & Young maintains 59 percent of new middle-class retirees will outlive their savings. While 68 percent of U.S. workers have access to some retirement benefits, only 54 percent participate in those available plans.
Obama said in remarks delivered at the United States Steel Corp.’s Irvin Plant in West Mifflin, Pa., during a signing ceremony on Wednesday, that “for those of you who don’t have a 401(k) on the job, don’t have a pension on the job, don’t have a mechanism to start saving — especially younger workers — you can get started now. And in an emergency, you can withdraw contributions without paying a penalty. So it’s a pretty good deal. And what I’m hoping is that working Americans will take a look, because I want more people to have the chance to save for retirement through their hard work. And this is just one step that we can take to help more people do that.’”