With half of American households lacking any retirement savings, President Obama has decided to attack the problem by announcing a new government program called My Retirement accounts.

Modeled on the Roth IRA, the new MyRAs will allow those who haven’t started saving for retirement to put away as little as $5 every pay period into a retirement savings account invested in treasury bonds. The program would be available to individuals who earn up to $129,000 a year (and couples up to $191,000) and the account would move with an enrollee even as he changes jobs. the MyRA would also be guaranteed against losses.

The program’s legitimate goal is to create an easy, secure and affordable way for those with modest incomes to start saving. however, while saving for retirement is important, there is little to suggest that a government-run program will be effective in encouraging Americans to save more. MyRAs also could backfire by encouraging workers to assume that saving as little as $5 a month is sufficient for retirement planning.

Finally, Americans don’t just lack retirement savings, they lack savings of any kind. The private financial service sector already offers programs and vehicles that encourage americans, even those with modest incomes, to save. Rather than create a duplicative government savings program, policymakers should encourage savings across the board and focus on reducing barriers to job creation, which remains americans’ greatest financial vulnerability.


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