During last night’s State of the Union Address, President Obama addressed a very critical issue: the lack of retirement security in America. Many workers, especially low-income employees, still do not have IRA or 401(k) accounts, and thus are unprepared for retirement. According to the U.S. Census Bureau, 36 percent of Americans currently do not save for their retirement and that only 4 percent will have adequate capital to maintain their pre-retirement lifestyles once they stop working.
In response to this issue, President Obama plans to create a simpler “starter” investment account called “myRA” or my Retirement Account. “myRA” will be tailored for individuals who are just starting to save for their retirement. This plan will be led by the Treasury Department and will be created through an executive action, which means that it will not need congressional approval.
However, as promising as this plan sounds, it can only be successful if business owners make a big effort to auto-enroll their employees who currently do not have coverage. In addition, employees who live paycheck-to-paycheck may not be as open to this idea because their salaries will have automatic deductions. It is clear that this plan will need tremendous support from the federal government, business owners, and American employees.
More details of this proposal will be revealed during a speech the President will give on Wednesday in Pittsburgh.