The new retirement savings vehicle that President Obama proposed in his state of the union address this week would give all Americans access to an investment that mirrors the G Fund inside of the Thrift Savings Plan, something previously only available to federal employees.
According to Treasury Secretary Jacob Lew, 100% of any contribution goes into the account and is invested in a Treasury security. “That means it will be backed by the full faith and credit of the United States, will earn the same interest rate that is available to federal employees for their retirement savings, and the balance will never go down,” Lew said in a recent op ed.
Obama added that “These account balances will never go down in value.”
The G Fund has sparked some controversy, however, during times of nearing the debt ceiling. The government has borrowed money from the G Fund to meet its debt obligations prior to Congress raising the debt ceiling, something about which FedSmith.com users have expressed opposition. The money has always been returned after the debt ceiling was eventually raised.
Having the general public contributing to the G Fund for their retirement savings presumably would dramatically increase the money available inside of the fund, thus giving the government even more available funds from which it could borrow during times of a debt ceiling standoff.
Critics have added that while the myRA offers another potentially good investment vehicle, it does not mean people will use it. A number of retirement savings programs already exist, but many people are not contributing. A recent study found that nearly half of all Americans live paycheck to paycheck which makes throwing money at retirement savings less likely to occur.