President Obama's New Plan Could Change Millions of Lives

President Obama has introduced a new retirement savings plan that may set millions on the road to a stable and plentiful retirement.

Feb 2, 2014 at 11:41AM

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 (NASDAQ: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.

By Alamosbasement

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
Saving is critical, and so to is finding great investments. But it's no secret investors tend to be impatient with the market. Yet the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America, TD Ameritrade, and Wells Fargo. The Motley Fool owns shares of Bank of America, TD Ameritrade, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers