A new type of “starter” retirement savings account for smaller balances that’s backed by the federal government but administered by employers was promised by President Barack Obama in his 2014 State of the Union address on Jan. 28. The president said he would use an Executive Order to direct the U.S. Treasury Department on Jan. 2 to begin a new tax-deferred savings bond, known as “myRA,” to help American workers without access to an employer account save for retirement.
He also took aim at longtime tax incentives for high-income savers’ retirement accounts in the speech, a proposal that drew a negative reaction from the retirement fund industry.
In a fact sheet about the speech posted on the White House website, the myRA was described as “a simple, safe and affordable ‘starter’ retirement savings account.” It is to be offered through a Roth individual retirement account.
The president also called for Congress to create automatic IRAs for all workers who don’t opt out of them. Obama has included this in previous budget requests but Congress hasn’t acted on it.
He also proposed to remove retirement tax shelters “for the wealthiest, while improving them for the middle class.” The State of the Union fact sheet said “… our tax incentives mostly benefit high-income individuals already well-positioned for retirement, allowing them to reap tens of thousands of dollars more in tax breaks than middle-class families.” It said the president wants to work with Congress to ensure that ”when we take steps to reform our tax code that we also reform upside-down retirement tax incentives.”
Retirement investment and administration industry advocates quickly responded to the initiative with concern.
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