PhotoPresident Obama's guaranteed retirement savings plan got only a few lines in his State of the Union speech last night and isn't being much remarked upon today, but it could give vulnerable Americans a shot at beginning to save at least a few dollars for their retirement.

"Let’s do more to help Americans save for retirement," Obama said. "Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401ks." 

The plan -- called MyRA, as in "My IRA" -- is basically very simple: It's a savings bond that pays a little bit more than a regular Treasury bill. Technically, it's a Roth IRA, a savings vehicle that lets you invest after-tax funds and withdraw them after retirement without paying tax on the interest you've earned.

As Obama put it: "It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in." 

Professional investment advisors are skeptical of the plan's prospects for success, however.

“It's not going to go anywhere. It adds to the alphabet soup of all the different kinds of IRAs,” George Papadopoulos, the head of a financial advisory firm that bears his name, said. He predicted that workers will procrastinate, according to the trade journal Investment News.

John Hauserman, president of RetirementQuest Wealth Management, called it "silly," saying it deprived working people of the much higher gains they could achieve in the stock market. 

Decent though modest

Obama, in introducing the plan, had compared it favorably to the stock market, saying that not everyone could enjoy the high returns the market has returned over the last year, though he didn't say why not.

Earnings from MyRA would be, Obama said, decent though modest -- about 1.4% at current rates. But earning a little bit of interest and saving the principal is a lot better than saving nothing. 

Obama's plan is indeed modest. It would only allow savings up to $15,000, at which point the money would have to be rolled over into a regular, privately-administered Roth IRA. 

MyRA is also simple, and is intended to encourage workers to start saving right now, rather than putting it off until someday in the dim and distant future, a day that all too often never comes. 

Contributions could come through regular payroll deductions of as little as $5. And although employers would collect the money, they would not be in control of the fund -- therefore, the employee's money wouldn't wind up being invested in company stock that might conveniently turn out to be worthless down the road.

The program is similar to the Thrift Savings Plan that's now available to federal employees.  Obama is implementing the program through executive order, basically directing the Treasury Department to go ahead and do it.

By itself, MyRA won't solve the critical problem of Americans approaching retirement with virtually no assets but it could help older Americans squirrel away a few dollars. And, more importantly, it could help younger Americans get into the habit of investing and would demonstrate the power of compound interest over time, setting an example for future generations.

But will it match the stock market? Not likely, most financial professionals seem to agree.


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