President Barack Obama is offering more Americans the chance to put away money for retirement through payroll deductions with a plan for new government- sponsored savings accounts.
The accounts, which Obama announced yesterday in a State of the Union address that concentrated on expanding economic opportunity, will be aimed at workers who don’t have access to a 401(k) plan, administration officials said.
The “MyRA” plans, similar to individual retirement accounts, will provide “a new way for working Americans to start their own retirement savings,” Obama said.
Under the proposal, workers could have part of their pay deducted for deposit into an account invested in U.S. government bonds that would be treated for tax purposes as a Roth individual retirement account, with future earnings tax-free. The accounts would be open to people with annual household income up to $191,000 whose employers choose to participate, according to a White House fact sheet.
Initial investments could be as low as $25 and payroll contributions as low as $5. The plans, set up through the Treasury Department, would have a maximum balance of $15,000, after which money would have to be rolled over into a private- sector Roth IRA, the fact sheet said.
Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager, said in a statement yesterday that he’s “tremendously encouraged” by a proposal he said he hoped would “kick off a much-needed national conversation” on retirement security. Other financial industry representatives also supported the plan.
Existing Authority
“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 young workers, you can get started now,” Obama said today at United States Steel Corp. near Pittsburgh.
For both employees and employers, the so-called MyRA accounts would differ from more familiar 401(k) plans.
Workers would have only one investment option -- the basket of government bonds available to federal workers in their retirement plans. The bonds have maturities between four and 30 years. Most 401(k) plans offer a variety of investment options.