Jan. 31 --When it comes to retirement savings, America has become a nation of haves and have-nots. Congress wouldn't let President Barack Obama help the have-nots with a stick, so now he's trying a carrot. The stick was something called the Auto-IRA, which would have forced most companies to offer a basic retirement plan. Obama mentioned it again in Tuesday's State of the Union speech, but business groups hate mandates. He clearly doesn't have the votes to make the Auto-IRA happen. The carrot is Obama's new, voluntary myRA, which is short for my retirement account. It's safe and low-cost, and the account's earnings aren't taxable if you hold it until retirement. Financial experts like the myRA's features. There's only one investment option, not an array of confusing choices. You can't lose money. The bonds in the account will be like those in the federal Thrift Savings Plan, where the government-bond option yielded 1.47 percent last year. Plus, you can start with just $25 , and add as little as $5 per paycheck. "The features should appeal to people who have not been savers in the past," says Rick Hill , managing principal of Hill Investment Group in Clayton. "Saving money is a behavioral trait. If you encounter any obstacles, whether it's expense or volatility, you may not do it." The plan is designed to appeal to employers, too: Unlike a 401(k) plan, it doesn't impose any fiduciary liability or require complex reporting and recordkeeping. Employers' only responsibility would be to set up payroll deductions. "This is well targeted to get to people who don't have coverage now," says Jeffrey Brown , a finance professor at the University of Illinois . "It's not imposing any new liability or costs on the employer." The modern retirement system, in which 401(k) accounts have largely replaced traditional pensions, can be criticized for leaving a lot of people without adequate resources for their golden years, but it works pretty well for those who are in it. "The biggest predictor of whether employees are going to be saving is whether they work for an employer who sponsors a retirement plan in the first place," says Jack VanDerhei , research director at the Employee Benefit Research Institute . For workers earning between $30,000 and $50,000 a year who are eligible for a 401(k), VanDerhei says, the participation rate is 70 percent. The trouble is, 43 percent of people in that income category don't have either a pension or 401(k). They could get the same tax advantages in an Individual Retirement Account, but most don't bother. The signup rate for IRAs is under 5 percent. In other words, passive saving is easy for most people, but active saving is hard. Fewer than half of all private-sector workers have that passive-saving option, according to the EBRI. Many of the have-nots work at small businesses, and many are part-timers or work in low-income occupations. Obama faces a huge marketing challenge: His administration must explain a brand-new program to thousands of employers and hope that they care enough about their workers to offer it. Many owners may balk because they don't think their workers -- especially part-time or temporary staffers -- really care about saving for retirement. Others will be suspicious of anything coming from Washington , even a voluntary program. Probably, then, the myRA will put a few people on a path to a better retirement, but will make only a tiny dent in the nation's retirement-savings deficit. ___ (c)2014 the St. Louis Post-Dispatch Visit the St. Louis Post-Dispatch at www.stltoday.com Distributed by MCT Information Services
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