Training wheels to help you save for retirement

The government has introduced a retirement savings plan akin to a bike with training wheels. This starter account, called “myRA,” is meant to get millions of people into the habit of saving for their senior years.

President Obama authorized the Treasury Department to create myRA, which is targeted to low- and middle-income workers who don’t have access to a workplace retirement plan. After a limited test ride, it’s now rolling out nationwide. To sign up, go to myra.gov.

The account is similar to a Roth IRA. You contribute earned income after taxes, and your earnings aren’t taxed. Account holders can build savings for 30 years or until their balance reaches $15,000, whichever comes first.

Let’s stop at the $15,000 figure. Such a low ceiling gives pause to many people. Just like you wouldn’t expect a teenager to still be riding a bike with training wheels, the point isn’t that $15,000 is going to be anywhere near enough for retirement. The goal is to cycle folks from a myRA to other retirement accounts with more investment options to further increase their savings.

“We are being very clear this is a start and not a finish,” said Treasury Secretary Jacob Lew.

One of the nice features of the plan is that it’s not linked to any employer. People can fund it through electronic transfer from their checking or savings account. However, the hope is that employers will get behind myRA and encourage employees to direct-deposit funds from their paycheck. Account holders can also directly deposit a tax refund.

Here are some other perks:

No fees. What you pay to have your money invested directly impacts returns. And myRA doesn’t charge a penny.

Plus, there is no financial barrier for employers. They don’t administer the accounts and don’t have to come up with money to match employee contributions.

No minimums. One reason people don’t invest is that the entry price can be high. A myRA can be opened with as little money as you can spare and contribute at whatever schedule is best for you. There is an annual limit of $5,500, or $6,500 for individuals 50 or older.

There are also income restrictions. You can’t contribute if you have an annual income of $131,000 or more if single, and $193,000 or more if married filing jointly.

No risk. The money invested in a myRA is backed by the federal government. It will earn the same interest rate that is available to federal employees in the Thrift Savings Plan Government Securities Fund, which earned 2.31 percent last year and an average of 3.19 percent over the past decade. Your investment is guaranteed to never decline in value.

With this account, you can take out your contributions tax-free and without penalty. However, interest earned can be withdrawn without tax and penalties only under certain conditions.

When the president announced the plan, I was concerned — and still am — that inertia will set in and people will think investing small amounts will be enough.

Critics say this investment option is too conservative and will barely keep up with inflation. Others worry that people will put money into the account and then use it as a slush fund, withdrawing money when hit with a financial crisis.

These are legitimate concerns and yet we still should get behind this effort.

The Treasury Department has been taking a lot of heat lately when it comes to its efforts to help and protect small investors. There’s the agency’s ongoing fight to increase standards for professionals giving investment advice, some of whom are pushing back. Now there are pot shots at myRA.

I’m in the camp that says myRA is better than the alternative, which is leaving millions of people without a way to start saving for retirement. I’m encouraging folks to sign up.

I think about how safe my children felt as they learned to ride their first bikes. I remember how scared they were when the training wheels were removed. Yet without having used them, they might not have learned the skills to ride.

Lew thinks that once people see the accounts build up — even with tiny returns — it will be a confidence booster. I think so too.

Those of us who have experience working with people living paycheck to paycheck don’t underestimate the power of just getting started. It can be a powerful motivator.

We’ve got to push people to use this savings vehicle and at least start saving something. If the habit sticks, many will likely take off the training wheels.