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President Obama's New Plan Could Change Millions of Lives

President Obama introduced a new plan urging more Americans to save for retirement -- and it could help millions.

President's State of the Union speeches are always full of promises that often paint the pictures of things that could and should happen, but after the lights dim and the night ends, those assurances, plans, and promises often never see the light of day.

Political gridlock ensues, partisan agendas take precedent, and Americans are met with stagnation as business-as-usual continues on.

One can only hope that is not the case with the recently announced "myRA," plan that President Obama introduced and the Treasury Department has since created.

What it is
In the words of the White House, myRA is "a new simple, safe and affordable 'starter' retirement savings account that will be offered through employers and will ultimately help millions of Americans begin to save for retirement." 

The plan will offered via a familiar Roth IRA account -- which is another IRS-sanctioned retirement plan that allows individuals to contribute after-tax dollars up to $5,500 per year to invest tax-free -- and seemingly will be provided through any bank that offers retirement accounts like Bank of America (NYSE: BAC  ) , Wells Fargo (NYSE: WFC  ) , or TD Ameritrade (NYSE: AMTD  ) .

It will be aimed primarily at the millions of citizens who currently don't have a retirement option through their employers -- and contribution levels can start at just $5 through automatic deductions. There will be little to no cost to those employers, and individuals can save up to $15,000 over the course of 30 years to their myRA before it is transferred into a traditional Roth IRA account.

While the money is in the myRA account, it will be invested in the Thrift Savings Plan Government Securities Investment Fund ("G Fund"), which is government guaranteed. In addition, there is no chance the principal of the account -- what is contributed -- will go down in value. A person can withdraw their contributions tax-free.

Source: alamosbasement on Flickr.

Why it matters
Although $15,000 doesn't sound like a ton of money when considering what is needed to save for decades of retirement, it could actually result in an incredible amount of savings over the course of a lifetime.

If we use an example of a 25-year old who starts saving $1,500 per year via the myRA, she will max out the plan after roughly eight years -- assuming the money grows at 5.7% per year (the historical G Fund annualized return since it began in 1987).

Let's say that person wasn't sure if she was going to need that money during those eight years, but now has built up enough savings, and she can afford to take a little more risk.

Her $15,000 is rolled into a Roth IRA, where she invests it in a low-cost S&P 500 index fund that subsequently returns 7% annualized for 40 years. When that person is ready to retire at age 73, that cash pile would be worth over $220,000.

Warren Buffett, the world's third-richest man and one of the best investors ever, was recently asked, "What's the biggest mistake we make when it comes to money?" he noted simply:

Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit.

Obama said the intention behind myRA was that it "encourages folks to build a nest egg," and if it can instill the habit of saving early, that Buffett describes, it could mean monumental benefits to countless individual Americans.

No matter what you think of President Obama, the reality is, the creation and use of the myRA plan could be the critical step for millions to begin their way to financial freedom and the safe retirement we all desire.

Where to begin
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Read/Post Comments (23) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 02, 2014, at 1:29 PM, KSredhead wrote:

    If people had any extra income to save they would be using one of the methods already in place. The problem is alot of people are living paycheck to paycheck, so having a new way to save for retirement does them no good. The President needs to figure out a way to improve the economy, get people back to work and raise salaries so we can save.

  • Report this Comment On February 02, 2014, at 1:37 PM, CQMckay wrote:

    I have always really liked motley fool but this is pure dribble. I don't see anything new here except that people can save in a "guaranteed" government plan. Social Security was a "guaranteed" government plan also and they stole that money so who says they won't "borrow" this the same way? In fact I would be surprised if they didn't. l do not like anything in fact that lends credibility to anything that obama is doing, I think it's all just a shell game to get his hands on more of other peoples money.

  • Report this Comment On February 02, 2014, at 1:54 PM, stockmajor wrote:

    That's President Obama. You may not respect the man, but should respect the office.

    I like the myRA plan. And I don't believe the government will "borrow" the money the way the social security monies were taken.

    It still doesn't save enough for a full retirement but it is a start. We need to do more to ensure the security of our retirees. Not less.

  • Report this Comment On February 02, 2014, at 2:00 PM, etjla wrote:

    5.7% return on the G fund. Tell me another story. It hasn't been that high in years. Currently its running around 1.5%.

  • Report this Comment On February 02, 2014, at 2:15 PM, BurtsDog wrote:

    I laughed out loud when I read this. So the new big plan is to give your money to the government? OMG. This just gets worse and worse.

  • Report this Comment On February 02, 2014, at 2:16 PM, bamissfa wrote:

    MF is a constant shill for Obama.

    I respect the office unfortunatily Obama does not. He deserves 0 respect for his lies and sell out of the US citizens to illegal aliens, big unions and the New World Order.

    Obama can't stop lying. Obamacare is one huge TAX on the middle class. Inside of Obamacare are about 20 new taxes again on the middle class.

    Then he goes on his interview with Jake Tapper and says he wants nothing but to help the middle class. Liar. The man makes me sick to my stomach to see him or hear him. Satan has him

    His so called new savings plan is nothing more than a way to get our money. Obam

  • Report this Comment On February 02, 2014, at 2:22 PM, PaulSell wrote:

    Hog wash! The numbers for inflation increases and Govt. Bond's interest comes out to about 1% interest! You can pick up aluminum cans and do better than that for 15 years!

    Americans need to come to grips that our Liar-In-Chief knows as much about economics as my Bull Terrier knows about Sunday!

  • Report this Comment On February 02, 2014, at 2:28 PM, dstnrunner wrote:

    If you didn't save through an IRA, Roth IRA, 401k, 403b, 457 and any other acronym, why would another 4-letter word be any different?

    Can't "afford" to save just doesn't cut it. After all, we are talking about saving 5 or 10% of your income, so even if you're is making $2000 a month, is that $100 really going to change your life that much?

  • Report this Comment On February 02, 2014, at 2:50 PM, Corgini wrote:

    If anything, it will push up stock prices. More people buying the market means blindly buying stocks no matter what happens.

  • Report this Comment On February 02, 2014, at 3:20 PM, bytchatthebeach wrote:

    Article is an advertisement for the POTUS. No one objective opinion from the FOOLs. Always question authority. The government raided Social Security, that was not their money. They will be irresponsible in the management of MyRA as well. Just another way to get our hard earned cash. The FOOLs should be ashamed of themselves. I am.

  • Report this Comment On February 02, 2014, at 3:23 PM, NotarySojac wrote:

    I've been an Obama fan for the most part. I could even be described as one of those terrible Liberals that right-wingers so much like to sneer at. But frankly, I think Wall St. is pulling Obama's strings. Any investment plan that he is pushing is going to be a windfall for the Wall St. banks and a disaster for working people. I certainly wouldn't buy into any plan proposed by the republicans, but then anyone with a brain already knows they're out to rob us blind. Obama might have good intentions, but he's turning to the foxes for advice on how to protect the hens.

  • Report this Comment On February 02, 2014, at 3:50 PM, DrSuds wrote:

    I have stopped listening to this man. There is always a shred of truth behind what he says but never any substance. As for the idea of everyone having his own retirement account, this is something I have advocated for years. However, it must not have government involvement while it must have government sanction and protection. What we have now is too much reliance on Social Security and bad guidance from the greedy who would take more for themselves than they would earn for others.

  • Report this Comment On February 02, 2014, at 4:12 PM, Alejandro040189 wrote:

    I don't know if I read wrong but maximum you can save is 15k in 30 years ..... I dare anyone here to survive one year with 15k taking into account all expenses the retired have ......15k is supposed to " change ppl's lives" give me a break. This is just another political ploy to pretend something is being done about the retirement crisis that looms. And please don't be offended but to to argue that this " new plan" may be the salvation to "millions of lives" is just cruel to those who rely on accurate information from authors such as yourself.

  • Report this Comment On February 02, 2014, at 4:15 PM, kmiao1 wrote:

    This MyRA plan is a joke and a cruel one at that. You are better off using one of the existing tools (regular IRA or Roth with a direct deposit) because you'll have flexibility. Here, you are buying into US government bonds (you are lending to the government) and hope you will beat the "official" inflation rate. I suspect that you won't have any other option to invest, which wouldn't surprise me.

    Smoke and mirrors folks, that's all this is. Obama is just taking advantage of the mass ignorance on investing and saving, and the main stream media is an echo chamber.

  • Report this Comment On February 02, 2014, at 5:11 PM, Ethanoldawg wrote:

    17 trillion in debt, and we start a program to loan the government more. This sure sounds intelligent. I feel sorry for the children.

  • Report this Comment On February 02, 2014, at 6:34 PM, Disgustedman wrote:

    And they said that Obamacare would insure everyone and you could keep you doctors and it would be affordable....aaahhhhahahahahahahahahahahahahahahahahahahahaha!!!!!!!!!!

  • Report this Comment On February 02, 2014, at 10:45 PM, BEACH2916 wrote:

    I can't believe the Fool has turned into a liberal hack site. What will $225000 buy you in 40 years?

    You can do all of these things on your own in the market now. I did. It's called a self directed IRA. Duh!!!!!!!!!!!!!

  • Report this Comment On February 02, 2014, at 11:09 PM, kennyhobo wrote:

    You can keep your doctor. You can keep your health plan. You can keep your savings. But Obama knows the facts. You are screwed.

    Why would anyone trust Obama's statements? ideas? He has proven himself to be an lying incompetent. The Obamacare fiasco is perfectly clear. The lies are obvious! The failure of the IT system to implement Obamacare are obvious. No one would give a dollar to an Obama Plan unless they were ignorant. Unfortunately, there are large segments of the population who no longer graduate from high school. They would give Obama their money, vote for Obama, and be on food stamps for the rest of their lives.

  • Report this Comment On February 02, 2014, at 11:26 PM, Astros58 wrote:

    Savings is a great idea! A couple of important matters - first, and most importantly, you have to have a job and secondly, a current 401K investment I have has lost 10% value so far in 2014.

  • Report this Comment On February 03, 2014, at 8:43 AM, sachiona wrote:

    President Obama, is the first President elected in the United States of America to get a National Health Insurance for the betterment of the people. Canada, England, and third-world countries like Jamaica and Cuba, just to name a few, all have National Health Insurance. Like President Obama because of his race or not, blame him for what mess was created long before he became President or not, refuse to give him credit for introducing MYra, for taking out Bin- Laden, fighting for women's rights and the rights of all people regardless of race, color or creed or not ... guess what! This country was built by foreigners. All our great grands and so forth were illegal aliens before they became legal american citizens. Mind you, some of them had their original names changed to be accepted in this country. That's why the One who holds our future, who created this universe placed him there to humble people who think they are in control of our destiny.

  • Report this Comment On February 03, 2014, at 12:55 PM, disabledvet43 wrote:

    is bin ladin really dead??????????

    has the deficit gone down since Obama

    has been in office, really with no disrespect

    just my opinion has our chief really helped

    our country.......already 6 yrs in office or is

    it more I haven't seen nothing get better

    however I have seen a lot get WORSE


    HAVE FALLEN SO LOW..............

    disabled vet who know when they will

    take our monies away we cant walk use

    our limbs think straight send us to war

    and then screw us later..............AMERICAN

    people need to really look at what's going on

  • Report this Comment On February 03, 2014, at 4:01 PM, BeverlyT wrote:

    It is NOT a government program, thank God! He is merely talking to banks asking them to set up a program for saving for retirement, which are a dime a dozen, since we have tons of them optional right now. AND it will be one where they can draw money out during their savings years, which defeats the purpose of a new different plan because we can do that with our IRA's and 401K's right now. No big deal!

  • Report this Comment On February 03, 2014, at 9:34 PM, DaSky wrote:

    You are not even attempting to conceal your Leftism anymore Fool!

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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