News & Commentary

11:12 AM
Kelly Sheridan
Kelly Sheridan
Commentary
Connect Directly
Twitter
LinkedIn
Google+
RSS
E-Mail
50%
50%

What's the MyRA's Impact on Traditional Financial Services?

The MyRA program, through which Americans can invest up to $15,000, will enter the consumer market later this year.

The government recently announced plans to test its MyRA program, which aims to help workers who lack employer-sponsored retirement plans or cannot afford a Roth IRA. The program will be administered through the Treasury’s savings bond authority and managed by the Treasury and one other agent.

“Later this year, the Treasury will work to choose a financial agent,” explains a U.S. Treasury official in an interview with I&T. That agent will administer the program, he says, and the government will utilize its existing infrastructure for performing functions to customers. Decisions regarding the user experience of MyRA account holders will be made in coming months as the Treasury launches the program, which it was instructed to do last Wednesday through the Presidential Memorandum.

[ Read: Insurers Must Adjust to the Sharing Economy. ]

MyRA is still in its early planning stages and will be first available to people who work for employers that sign up for the program. Once the testing stage is complete, MyRA will be rolled out to any American who has direct deposit and a household income of under $191,000.

The no-fee MyRA program resembles a Roth IRA in that users will contribute after-tax dollars. Participants can open their accounts with an initial deposit of $25 and contribute a minimum of $5 per day. While users won’t contribute much, they won’t gain much, either – the 10-year average ROI is just 3.6%, reports CNN. Once account funds reach $15,000, the holder is required to transfer the money into a private sector account.

Financial companies should not worry about potential disruption, according to MarketWatch, which wrote: “With its low caps and its potentially low returns, the myRA doesn’t seem especially competitive with more traditional 401(k)s and IRAs." The website also notes that its low stakes could actually prove agreeable to the financial services industry, as it doesn’t pose the threat of competition.

Kelly Sheridan is an associate editor for Insurance & Technology. Prior to joining InformationWeek Financial Services, she was a staff writer for InformationWeek and InformationWeek Education. Kelly has also written for trade publication Promo Marketing and a number of ... View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Kelly22
50%
50%
Kelly22,
User Rank: Author
2/11/2014 | 4:50:05 PM
re: What's the MyRA's Impact on Traditional Financial Services?
I agree that this seems like a good way to help people ease into retirement saving, especially since there are no fees. The small investments make it ideal for people who don't make much but still want to save for the future.
IvySchmerken
50%
50%
IvySchmerken,
User Rank: Author
2/7/2014 | 2:59:43 PM
re: What's the MyRA's Impact on Traditional Financial Services?
Even though MyRA is not going to compete with traditional IRA/401k products - since they will offer low-return investments, it could bring the government into a financial services type of business. I think its' a terrific plan to help immigrants and other lower-income earners save for retirement in an incremental and secure way. This can bring them into investing and educate them and perhaps develop into more product choices down the road.
KBurger
50%
50%
KBurger,
User Rank: Author
2/6/2014 | 9:08:58 PM
re: What's the MyRA's Impact on Traditional Financial Services?
MyRA may not be a directly competitive product but we are seeing a renewed spurt of interest in the underserved (unbanked, uninsured) financial services customer -- not from banks or insurance companies, but from tech companies (T-Mobile, for example), the Postal Service (which may get into financial services), and now this offering via Treasury. The unbanked/uninsured market is not easy to serve because of credit, language, legal, financial issues, but it's huge. And it's not just undocumented immigrants -- it includes students & young people, exactly the segment that insurers and banks want to reach. As the market becomes increasingly fragmented, insurers must understand they are competing with lots of players, not just other insurance companies.
Register for Insurance & Technology Newsletters
White Papers
Current Issue
Insurance & Technology Digital Issue Oct. 27, 2014
Innovation? Check. Core modernization? Check. Security? Check. Today's insurance IT challenges don't stump this year's Elite 8.
Slideshows
Video