Retirement headlines on newspapers

Who Needs To Save?

During this year’s State of the Union speech, President Obama announced a new savings account that soon will be offered by the federal government. “myRA”, the long form of which is “my Retirement Account”, will be offered by the U.S. Treasury. It will be a very low cost of entry, long-term savings account. The goal is to encourage savings among Americans and to achieve the triple goal of being simple, affordable and safe. Read more about myRA.

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If you follow the statistics on savings, you know that Americans don’t save much. More striking, less than half of American households have any savings set aside for retirement. Even among savers, many people essentially save to spend, setting aside money for emergencies or for needs or wants that are going to occur within the next few weeks or months. Most Americans who are employed have access to a 401k or its government equivalent, and a lucky group, declining every year, is eligible for a pension. But even among employed Americans, at least one-quarter, especially those who work for smaller firms, don’t have access to such a plan. Part-time and contract workers seldom are eligible for employer-sponsored retirement savings plans. It adds up to tens of millions of workers who don’t have access to retirement plans.

That’s where myRA comes in. While employees who already have established saving plans and savings patterns might find this product to be interesting, it’s not geared to them. It’s aimed at their counterparts who haven’t been able to set aside anything up to this point. Another way in which this account is aimed at starter savers is that it has an upper limit. Once savers have accumulated savings up to the limit, they’ll be encouraged to move toward bank and investment firm offerings.

As the U.S. retirement savings culture moves from the Defined-Benefits structure prevalent in the last century to a Defined-Contributions structure that makes each individual more personally responsible to save for his or her own retirement, it makes a difference whether people have the tools and capabilities to get there. Fortunately for many of us, the private sector offers a profusion of choices. For those who haven’t yet found that answer, or who feel there are too many barriers in the way, the U.S. government has just created an answer that could help give that portion of our population greater financial independence. That’s myRA. Check it out.