It's hardly perfect, but my RA is worth it
My oh myRA! The government is promoting thrift again. To the average working man or woman.
A new savings vehicle for the “little guy” is in the offing — President Obama's myRA, “my retirement account.”
It's not perfect but it's a start. And if employers go along, it should have a powerful thing going for it: payroll savings. The save-it-before-you-take-it-home advantage, secret weapon of sensible folks determined not to spend every dollar they make.
The president got myRA rolling with an executive order last week at U.S. Steel's Irvin Plant in West Mifflin. Steel coils ship out of there in huge tonnages, and workers in hardhats count on company pensions and Social Security for their golden years.
But are those sufficient anymore?
Life expectancy keeps stretching out. Social Security appears in need of rescue long-term. And “defined benefit” pensions are disappearing across the industrial landscape. “Defined contribution” plans are in, mainly the 401(k) typically invested in mutual funds. But not all workers are eligible for a 401(k) and millions more aren't interested.
Hence myRA. The Treasury Department still has to iron out the details. Congress also may take a hand. So myRA isn't really open for business yet.
The president outlined a savings system that can start with as little as $25 and grow as slowly as $5 a paycheck.
Deposits will have to be from after-tax money. But distributions down the road will be tax-free as in a Roth IRA. A worker who switches jobs can take his myRA with him.
But there are catches.
The new account is only open to households under $190,000 income.
And the money must go into one pot — the Thrift Savings Plan of the Government Securities Investment Fund, familiar to millions of federal workers. Last year the G Fund returned a mere 1.89 percent. From 2003 through 2012 its returns averaged 3.61 percent. Not exactly stellar. Standard & Poor's 500 stock index grew 16 percent last year.
But stocks can go down too, as they're proving in 2014, and myRA cannot lose principal, except as inflation cheapens its dollars, a vulnerability of savings instruments generally.
Another catch — or advantage, if you will — is that myRA money can be withdrawn any time without penalty. But if it's spent, it's not there for retirement.
Nobody will get rich this way. The Wall Street Journal quoted a Vanguard Group calculation that $50 saved from a paycheck every two weeks, at 1.5 percent average annual return, takes almost 11 years to grow to $15,000, at which point it would convert to an Individual Retirement Account (IRA) for hopefully better returns.
So myRA doesn't yet deserve three cheers. But it should focus working people on what the public schools absurdly have neglected to teach. That we've got to save something. All of us.
Jack Markowitz is a Thursday columnist of Trib Total Media. Email jmarkowitz@trib web.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Steelers use 3 late first-half TDs to stun Texans
- Rossi: Steelers’ season all about going big
- Pittsburgh police officers start wearing video cameras
- White Oak moves forward on community center
- Liberty hires 2 part-time police officers, honors another
- Demand for hazmat suits due to Ebola outbreak triples firm’s production
- Raptor system helps to protect Ringgold students
- McKeesport Area first-grader brings toy gun on school bus
- Kin of 2013 DUI crash victim in Hempfield lose young family in fire
- Pa. Congressional candidates hear about wide range of issues, concerns
- 12-year-old’s donated heart joins families, lets her memory live