Trump ad­min­is­tra­tion pulls plug on low-in­come re­tire­ment sav­ings plan

Trea­sury to phase out Obama-era pro­gram

USA TODAY Weekend Extra - - MONEY - Paul David­son @Pdavid­sonusat USA TO­DAY

The Trump ad­min­is­tra­tion said Fri­day it’s shut­ting down an Obama-era pro­gram aimed at en­cour­ag­ing low- and mod­er­ate-in­come house­holds to save for re­tire­ment be­cause the scant par­tic­i­pa­tion doesn’t jus­tify the cost.

About 30,000 Amer­i­cans have con­trib­uted a to­tal of $34 mil­lion to the pro­gram, called myRA, which launched in late 2014 as an op­tion for house­holds that didn’t have ac­cess to an em­ployer-spon­sored re­tire­ment plan, such as a 401k, the Trea­sury Depart­ment said. About 20,000 ac­counts have a me­dian bal­ance of $500, and the own­ers of 10,000 ac­counts made no con­tri­bu­tions.

It has cost $70 mil­lion to man­age the pro­gram — in­clud­ing server costs and pro­mo­tion — which was likely to cost an ad­di­tional $10 mil­lion an­nu­ally go­ing for­ward, the Trea­sury said.

“Un­for­tu­nately, there has been very lit­tle de­mand for the pro­gram, and the cost to tax­pay­ers can­not be jus­ti­fied by the as­sets in the pro­gram,” U.S. Trea­surer Jovita Car­ranza said in a state­ment. “For­tu­nately, am­ple pri­vate-sec­tor so­lu­tions ex­ist, which re­sulted in less ap­peal for myRA.”

Par­tic­i­pants were no­ti­fied by email Fri­day that the pro­gram will be phased out over the next few months, the Trea­sury said. They’ll re­ceive in­for­ma­tion about mov­ing their sav­ings to a Roth IRA. A Roth IRA, un­like a tra­di­tional IRA, makes con­tri­bu­tions with af­ter-tax dol­lars, but with­drawals are tax-free.

Un­der the pro­gram, con­tri­bu­tions were in­vested in U.S. Trea­sury sav­ings bonds rather than a port­fo­lio of stocks and bonds that typ­i­cally yield higher re­turns over time. Work­ers could con­trib­ute up to $5,500 a year, or $6,500 for those 50 and older.A max­i­mum of $15,000 could be con­trib­uted; at that point, the money would be rolled over to a pri­vate-sec­tor re­tire­ment ac­count.

This month, Demo­cratic sen­a­tors sent a let­ter to Trea­sury Sec­re­tary Stephen Mnuchin urg­ing him to keep and pro­mote the myRA pro­gram. It noted that this year, Congress re­scinded two rules aimed at mak­ing it eas­ier for states to cre­ate their own re­tire­ment sav­ings pro­grams for pri­vate­sec­tor work­ers.

“Given that this ad­min­is­tra­tion has worked to re­duce ac­cess to re­tire­ment plans for mil­lions of Amer­i­cans, it is more crit­i­cal than ever for the Trea­sury to strengthen one of their re­main­ing op­tions for re­tire­ment sav­ings,” the sen­a­tors wrote.

They in­cluded Sen. Patty Mur­ray, D-Wash., rank­ing mem­ber of the Se­nate HELP com­mit­tee, and Sen. Ron Wy­den, D-Ore., rank­ing mem­ber of the Se­nate Fi­nance Com­mit­tee.

“Un­for­tu­nately, there has been very lit­tle de­mand for the pro­gram, and the cost to tax­pay­ers can­not be jus­ti­fied by the as­sets in the pro­gram.” U.S. Trea­surer Jovita Car­ranza

GER­ALD HER­BERT, AP

U.S. Trea­surer Jovita Car­ranza, cen­ter, with Pres­i­dent Trump, an­nounced the phase out of the myRA re­tire­ment sav­ings pro­gram Fri­day, say­ing the cost is pro­hib­i­tive.

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