U.S. savings bonds designed for retirement accounts have been proposed in the past and termed R-bonds, said Don Fuerst, an actuary and senior pension fellow at the American Academy of Actuaries.
‘Small Amount’
The securities are seen as a way to allow low-income workers to save for retirement, Fuerst said. They usually can’t contribute much at the start, making their balances expensive to administer and vulnerable to investment-management costs.
“If you’re only putting a small amount into the plan the fees could eat up your investment income,” said Fuerst, who’s based in Washington. “This gets around that.”
With savings bonds, he said, the U.S. government can issue the investments and cover the costs of keeping track of them.
The accounts aren’t as attractive as a typical employer- sponsored 401(k) because there is no employer match and only one investment option, Graff said.
Even so, he said, it may significantly boost retirement savings for middle- and low-income workers who don’t have access to a 401(k) account, Graff said.
Middle- and moderate-income workers in particular are much more likely to set aside money for retirement when they can have it directly deducted from their pay, Graff said.
Among workers earning between $30,000 and $50,000 a year, 72 percent of those covered by an employer-sponsored payroll deduction retirement plan such as a 401(k) participate, while only 5 percent of those without such a plan set aside money through an IRA, according to a 2010 analysis of 2008 data by the Employee Benefit Research Institute.