Saving for retirement just became more difficult for thousands of Americans relying on the Treasury Department’s myRa retirement savings account as the agency recently announced it would wind down the program. In a statement released on the Treasury Department’s website, the agency said the $70 million in costs since 2014 became too costly to the taxpayer and could no longer justify the program’s expense.
“The myRA program was created to help low to middle income earners start saving for retirement. Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program. Fortunately, ample private sector solutions exist, which resulted in less appeal for myRA. We will be phasing out the myRA program over the coming months. We will be communicating frequently with participants to help facilitate a smooth transition to other investment opportunities,” said Jovita Carranza, U.S. Treasurer.
The myRA program functioned as a Roth IRA account with no fees, minimum balance, and non-deductable to help middle and lower income Americans without access to employer sponsored retirement plans like a 401(k) plan and save for their retirement. Participants under 50-years old could contribute up to $5,000 to their account every year while those 50 years and older could contribute up to $6,500.
Since its inception in 2014, the myRA program saw 30,000 accounts created with $34 million worth of investments. However, one-third of those accounts had no balance and the remaining 20,000 had an average balance of $500. According to industry researchers, the program’s demise came from a lack of bipartisan support, with the current Congress and administration having no buy-in or authorship to the law.
Current account holders will have two options now that the program is coming to a close. First, savers can roll their myRA into a traditional Roth IRA and avoid penalties. Second, savers can close their accounts altogether and have any earning subject to income taxes. Savers can visit myra.gov for more information on how to transfer their savings into another account.
Although the Treasury Department saw insufficient demand to justify the program in its eyes, the myRA retirement savings programs was none the less a significant and creative idea to help Americans plan for their golden years. According to some studies, only 50 percent of the country’s 55 million small business employees have access to workplace retirement plans and only one-third of part-time workers have retirement plans.