So Obama is planning on asking the Treasury Department to implement MyRAs, which are like Roth IRAs except don’t have any fees and can only be invested in Treasury instruments. The maximum total investment is $15,000 after which it must be converted to a regular Roth.
I don’t think this is that great an idea. I’m not opposed to Obama implementing this by executive order because this is not that different from TreasuryDirect, which is also a program which you can use to purchase Treasury instruments from. If you purchase savings bonds from TreasuryDirect, the interest is already tax deferred under most circumstances, so this is simply changing that to tax-free if you wait until retirement.
The reason I don’t think this is that great is because of the extremely low limit. It’s only around a $1000 a year upon retirement, so it’s not useful for retirement, which is sort of the point of retirement accounts.
And if you use it in the only way it is useful for, namely as an emergency account to stash some living expenses in the case of a medium term loss of income, then you get taxed (and possibly penalized) on the interest. On the plus side, like a Roth IRA you don’t get taxed on the principal since it’s already been taxed.
Any other thoughts?