In the State of the Union address last week, President Obama tackled an issue facing the American people – the impending retirement crisis.
The market downfall of 2008 affected many Americans’ finances, particularly those approaching retirement. With high unemployment and stagnant wages, many Americans have continued to struggle to put away enough money for retirement.
The program President Obama introduced is called myRA – a government guaranteed retirement savings program aimed at helping people save even if they have a limited income and do not have access to employer-sponsored retirement plans.
The administration estimates about half of American workers do not have 401(k) plans or other employer-sponsored work plans. Now, anyone in a household earning $191,000 a year or less can use myRA to plan for their financial future with an initial contribution of $25.
MyRA accounts were created to provide a safe and secure investment that will not decline in value. The accounts are government guaranteed, so they will not lose value despite economic downturns and will pay the same interest as the Government Securities Fund (G Fund).
Though this is a step in the right direction by encouraging Americans to invest in their retirement future, for most it will not be enough. The accounts have a maximum limit $15,000 before it is required to be rolled over to a traditional IRA, proving they are not meant to be Americans’ primary retirement vehicle.
You would likely need 30 years to double your investment in myRA, showing the importance of a diversified financial plan and one that starts early. Additionally, iut is important to think about how to convert your investment to income that will last throughout your life after retirement. Fixed indexed annuities can play an important role in solidifying your retirement plan by providing that vehicle of guaranteed income.
While the IALC applauds the Obama Administration for putting a national spotlight on the retirement crisis in America, for most people, myRA will fall short on ensuring a comfortable nest egg alone.