WASHINGTON (AP) — Even proponents of President Barack Obama's new retirement savings program readily concede it won't be a cure-all for a nation of people who are saving far too little for their golden years. Many Americans won't be able to participate initially, and those who do may find the benefits are modest.
Yet the Obama administration is hoping that the savings program — dubbed “myRA,” for “my IRA” — will serve as a call to action, spurring Congress to take more sweeping steps to shore up retirement security as company pensions become a thing of the past. Given a presidential boost, like-minded lawmakers are already pushing new legislation to vastly expand the number of Americans who put away cash for retirement.
“This is a small first step,” said Nancy LeaMond, AARP's executive vice president. “We think it is starting to generate a debate. Our hope is there can be action.”
Aiming to help the roughly half of Americans with no retirement plan at work, Obama announced in his State of the Union speech Tuesday that the Treasury would create new “starter” savings accounts. The program is geared toward low- and middle-income Americans who lack the upfront investment that many commercial IRAs require. Starting with as little as $25, savers could invest a little each month in Treasury bonds and then convert the accounts into traditional IRAs once the savings grow.
The idea is actually contained in a broader retirement proposal that Obama has been asking Congress to take up for years in his annual budget request. Obama wants all workers to be automatically enrolled in IRAs unless they specifically opt out. Under one scenario, monthly paycheck deductions would be invested in bonds unless workers choose another option.
But Congress hasn't acted on the proposal. So Obama is carving out the part he can accomplish without Congress and hoping that by raising the issue, lawmakers will feel pressure to act and the remaining pieces will fall into place.
Call it a “me first, now your turn” strategy — not dissimilar from the approach Obama is taking on wages. The president is ordering a higher minimum wage for federal contractors in hopes that Congress will take the next step by raising the wage for all Americans.
“I could do more with Congress, but I'm not going to not do anything without Congress,” Obama told workers at a Pennsylvania steel plant on Wednesday as he signed a presidential memo creating the myRA program.
Yet as with the minimum wage, the retirement program illustrates the severe limitations in what Obama can do to alter the economic reality for Americans when Congress refuses to go along.