Government's myRA Questioned : Does it Work or Not

Good summation of this savings account and how well it works or doesn't compared to the private sector accounts.

myRA program officially launched
Treasury-backed retirement plan doesn't replace workplace savings plans or Social Security

Today, the U.S. Department of Treasury launched its myRA retirement savings option, which is designed to, in part, fill the void for the more than 50 million Americans without access to a workplace savings plan.

Read: MyRAs, an ERISA-free zone “Once people start saving they’re likely to continue,” said Treasury Secretary Jack Lew in a video statement.

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Contrary to concerns raised by some critics of the program, Lew said myRA accounts are not intended to replace workplace savings plans or Social Security, but that rather they are a “bridge to other savings products.”

Meet myRA, and beat CD rates tax-free

Although myRAs won’t set the financial world afire due to built-in limits, they have a place in retirement planning. For the past year, Treasury has been running a pilot program with about 60 small businesses.There is no cost for business owners to offer access to the accounts to workers, who can have contributions deducted automatically from their paychecks.
Read: Comerica to manage myRA

myRA accounts have the same annual contribution limits as Roth and Traditional IRAs--$5,500 for individuals or $6,500 for those age 50 and over. Any individual making less than $131,000 a year, or $193,000 annually for couples, can enroll in the accounts. But they are substantially different from IRAs in that contributions will only be invested in newly issued treasury notes that will earn the same annual interest as G Fund securities available to federal workers through the Thrift Savings Plan.

Because the U.S. Treasury backs them, myRA investors will have no risk of losing money, said Lew. And they will incur no cost to open the account, as they come with no fees and have no minimum balance requirements. Once the accounts accrue $15,000 in value, or are held for 30 years, they will be required to roll over to private sector products.

The Securities Industry Financial Market Association, the largest trade organization for the securities brokerage industry, has lent its support for the program.
Last December, the Department of Labor wrote Treasury, clarifying that business owners who set up automatic payroll contributions to myRA accounts will not be subject to the Employee Retirement Income Security Act.

“The Department is of the view that an employer would not be establishing or maintaining an ‘employee pension benefit plan’ within the meaning of section 3(2) of ERISA based solely on the facts that employees participate through payroll withholding contributions,” wrote John Canary, director of regulations and interpretations at the DOL, in a letter addressed to Mark Iwry, deputy assistant Secretary for Retirement and Health Policy at Treasury.

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Some critics of the program, which includes the National Center for Policy Analysis, a non-profit, non-partisan policy think tank, say the limited investment structure of myRAs makes them virtually useless as a retirement savings vehicle.

The G Fund, the model for myRAs, returned less than .25 percent in 2014. In 2013, it was 1.89 percent. Since April of 1987, it has yielded 5.54 percent, according to the Thrift Savings Plan website.