Narrowing the country’s growing income inequality won’t be achieved through one, sweeping initiative. It requires many steps, larger and smaller. One in the latter category, unveiled by President Obama in his State of the Union address, calls for new savings accounts, a “MyRA, to help workers get started putting money away for retirement.
The president launched the accounts during a visit to Pennsylvania last week, issuing an executive order to the Treasury Department. The model is designed to serve those workers who lack a pension plan, or access to a 401(k) account or the practice of putting savings away.
Through an automatic payroll deduction, workers will be permitted to save up to $15,000. They may start an account with as little as $25, and make even smaller contributions each pay period. If the maximum amount is reached, the savings go into a private sector account.
The purpose is to get more people saving, in an easy and safe way — in Treasury securities, without fees, with a guarantee the balance never will go down, withdrawals permitted any time and tax-free. The MyRA is a small step, but it does have the advantage of providing a needed option for the roughly half of all workers now without an employer-based retirement plan.