Experts Recommend Policy Changes to Maximize Impacts and Promote Savings
WASHINGTON, DC – The looming crisis in retirement savings has prompted both state and federal proposals to improve access to retirement savings vehicles, including the Obama Administration’s myRA retirement savings initiative. Today, experts with New America’s Asset Building Program released recommendations for the Administration and Congress to maximize the impact of myRA through supporting both emergency and retirement savings. In a new policy paper, Solving the Retirement Puzzle: The Potential of MyRAs to Build a Personal Safety Net, New America experts note that while myRA is limited, it is the only major initiative to acknowledge the necessary link between having flexible emergency savings and building sufficient retirement savings.
Much attention has been devoted to the retirement crisis, but American’s savings deficiencies are broader than just retirement. 30 percent of households do not hold a traditional savings account and nearly half have no retirement assets. Experts estimate that nearly one-quarter of Americans will access their retirement savings for non-retirement needs. According to the IRS, Americans paid taxes and fees on about $57 billion of early withdrawals from 401(k)s in 2011. The myRA has the potential to prevent these penalized withdrawals by bridging the gap between emergency savings and retirement savings.
“The federal government plans to spend almost $150 billion supporting retirement savings next year,” said Justin King, policy director for the Asset Building Program. “Most of that subsidizes Americans with high incomes and none of it supports the flexible, emergency savings that should come first. Americans don’t have enough flexible savings, and policymakers’ neglect of this issue makes penalized withdrawals from retirement accounts inevitable. With a few tweaks and some cooperation from Congress, the myRA could create an innovative savings pathway that recognizes both short-term realities and long-term goals.”
Based on research into the savings habits of Americans and experience running AutoSave – a pilot project on flexible, workplace based savings interventions – the Asset Building Program recommends that the Administration and Congress push to make myRAs more universal, automatic, and flexible. Specifically, the Administration should:
Make myRA available to all employers that wish to participate, regardless of their sponsorship of an existing retirement savings plan;
Market myRA as a flexible savings vehicle, not simply dedicated to retirement savings;
Allow the self-employed to participate in myRA;
Provide for myRA account opening on federal tax forms;