RIP, MyRA

On January 28, 2014, President Barack Obama announced the following in his State of the Union address:

Let's do more to help Americans save for retirement. Today, most workers don't have a pension. A Social Security check often isn't enough on its own. And while the stock market has doubled over the last five years, that doesn't help folks who don't have 401ks. That's why, tomorrow, I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It's a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in.^[i]

A day later, he followed through on that promise, signing a Presidential Memorandum directing the US Treasury to develop these newfangled, government-designed retirement savings vehicles, which officially launched in November 2015. The point of this plan was noble enough: Encouraging more Americans to start saving and learn about retirement funding. Now, almost 20 months later, you might ask, how are they doing? The answer: Poorly! Which led the Trump Treasury to kill MyRA Friday.

MyRA is was a government-offered retirement account intended to let folks start saving cheaply, with no volatility-the funds earned interest based on Treasury yields. The rate was the same as federal government employees earn when choosing the "G fund"-the Government Securities Investment Fund option offered under its Thrift Savings Plan. In 2015 and 2016, the fund returned 2.04% and 1.82%, respectively. MyRA, unlike the government employee plan, had no other investment options. MyRA wasn't exactly offering you much reward.

Perhaps in part due to this, only about 20,000 Americans signed up for MyRA in its 20 months of life. In total, savers put $34 million into MyRA accounts, for an average balance of $1,700. Meanwhile, according to the Treasury, the program has cost the government (read: you, indirectly) $70 million-an average of $3,500, more than double the average participant balance. Which is ... not great? Heck, you could be forgiven for thinking a better alternative would have been to cut every MyRA account holder a check for $3,000 and let them invest it at some online discount brokerage.^[ii] Would have been a dramatically better return for savers, too! These accounts may have been cheap for holders (although not on an opportunity cost basis!), but they were darned expensive to administer.

In its statement regarding plan closure, the Treasury pointed out that the vast array of private-sector options gobbled up demand for MyRA. Got that? The private-sector crowded out the public sector. Which speaks to a relatively simple point: MyRA was never necessary. Even from the standpoint of encouraging people to save, the creation of a new vehicle was strange. From local banks to online brokerages, many places offer low-cost retirement savings options with no minimum balance-many offer better investment options than MyRA's low yields.

Now it seems MyRA holders will learn that too, as the Treasury will eventually require them move their savings to one of these private firms. When that happens, perhaps they'll learn about the universe of investment options available to them and see the impact of MyRA was, in part, missed opportunity-real, but often hard to quantify. Maybe they will understand the government's rationale and learn about costs and benefits. Hopefully, those who saved via MyRA learned the value of retirement saving, to some extent, in these 20 months. So maybe, just maybe, there are financial literacy positives to come from what was otherwise a well-intended but ill-conceived, ineffective and unnecessary boondoggle.