Among Americans who are in the workforce, almost a third have no personal retirement savings at all. More than 60 percent do not have a retirement plan through their job. Enter a federal innovation: myRA. Essentially, it is a federally-backed, safe place to save your money — a government spinoff of the IRA, individual retirement account — which launched nationwide this week.
Marketplace Morning Report host David Brancaccio caught up with U.S. Treasury Secretary Jacob Lew to talk about the thinking behind myRA, trade, currency manipulation, and what the U.S. should be doing to support global growth.
On the goal of myRA:
Lew: “I think myRA fills a critically important gap. People can put as little as a few dollars a week away and watch it build up over time. As their ability to save increases, [they’ll] have developed a savings habit, so that they will be preparing for their own retirement — no fees, no risk. So, it is not a competitor for private retirement plans, either employer based or commercially available, but it does fill a gap where people getting started have a place to go where they can feel comfortable and get started. And it is a big thing if you get started at 20 or 30 instead of at 40 or 50 or 60.”
On why the federal government is getting involved in personal retirement savings:
Lew: “The process of opening an individual retirement savings account with a very small initial deposit and small recurring deposits is not so easy. It’s not that attractive on a commercial basis for private firms. myRA caps out at $15,000. There are a lot of private firms that would love to take a rollover of the $15,000, but if you were to walk in or sign online and try to open a retirement account with a $5 deposit, it’s not so easy and the fees would start to hit pretty quickly. So this is something — a way of offering essentially savings bonds through a retirement product — that no one else can do.”
On whether the government should support automatic enrollment in employer-based retirement savings accounts:
Lew: “We have proposed legislation for years now to put in place an auto enrollment program. The research from behavioral economics is clear, if people have to opt in it’s a bigger hurdle than if they have to opt out. You want to make it as easy as possible to get started. So I applaud any efforts to move in that direction. We will continue to work with congress to try and get legislation that moves in that direction. But it is a step towards it to create a product like myRA, which is so simple and so safe and so affordable — that just by going myRA.gov people can sign themselves up.”
On whether the Transpacific Trade Partnership (TPP) does enough to address currency manipulation:
Lew: “There is for the first time ever in the context of a trade agreement a joint declaration that commits countries to refrain from practices that could be seen as being unfair currency practices, a commitment to a transparency regime so that we can each see clearly what each other are doing, and an agreement to have a process to hold each other accountable through a process of engagement. I can tell you that in my role here, I have used every opportunity I’ve had to bring clearly to bear the influence of the United States to have countries change policies that we think are unfair. I think with the joint declaration on currency, it’s a way to add to our tool kit — ways that we can hold countries accountable if they step out of line.”
On the lack of enforcement mechanisms for unfair currency practices in the TPP:
Lew: “What the joint declaration does, is it says that there has to be a regular process of monetary authorities engaging on these issues. The ability to hide behind opaqueness goes away. Now, I actually think that if that transparency is there, you’ll see less of the behavior that requires the intervention I’m describing because that opaqueness is something that countries hide behind. Its not as if they want to stand up and say, ‘we are engaging in competitive devaluation.’ They usually say, ‘we’re not doing it.’ I think the idea of creating a mechanism where central banks would be brought into a trade arbitration process is one that no country in the world would have agreed to. Frankly, if it was a question of putting our central bank decisions in a similar place, we would have problems with that as well.”
On what the United States should do to support growth in emerging economies:
Lew: “Globally, both emerging and developed economies are looking at the United States as a source of great strength. And I must say, that even over the last three years, I’ve seen a dramatic change — where three years ago you were at the end of the period with people saying how could the United States have been the center of a world financial crisis, to how can we be as resilient and respond as quickly as both the American people do and American policy does. I think clarity of communication is important, and that’s why you see so much emphasis on communication. The reality is a stronger US economy is good for the world. Our concern is looking internationally at how do you generate more solid and sustainable growth in other parts of the world, and that’s the kind of conversation we’ll be having at the G20.”
Click the media player below to hear the extended interview with U.S. Treasury Secretary Jacob Lew:
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