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President Obama's New Plan Could Change Millions of Lives

Patrick Morris
February 2, 2014

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 a