Even before the Obama Administration introduced the new myRA program last year, there were whispers that the U.S. government would “assume some risk” for U.S. retirement accounts.
That makes for a nice sound bite, but it’s really code for forcing American savers to buy government bonds.
Here’s how it works. There’s no minimum balance to open a myRA account. And the accounts don’t incur fees.
However, your myRA can only invest in U.S. Treasuries, which probably won’t even come close to keeping up with the real rate of inflation. In other words, what myRAs really offer is “return-free risk.”
As foreigners and the Federal Reserve buy fewer U.S. Treasuries, the U.S. government is searching for new buyers of its unwanted debt. This is where the new myRA program comes in.
The accounts don’t offer any significant new benefits over the existing options. They’re simply a way for the U.S. government to pass the hot potato on to unsuspecting Americans in exchange for their retirement savings.
The net effect is that Americans will funnel more of their savings into Treasuries. This, in turn, will help the U.S. government finance itself.
The truth is, a myRA is a sucker’s deal at best. But I suspect there’s something far more sinister behind this program…