President Obama unveiled a proposal in his State of the Union Address this week that would give many working Americans access to an offering within the Thrift Savings Plan, currently available only to federal employees.
Obama announced his plan to create by executive order a program called myRA, which would enable workers in households earning less than $191,000 annually to enroll in an Individual Retirement Account, or IRA. The plan will give private-sector workers the “same security investment return available to federal employees,” according to the White House, by earning the same variable interest rate as the TSP’s G Fund.
“It’s the same structure as the G Fund in the Thrift Savings Plan, so it’s the average of yields that are above four years,” said Treasury Secretary Jack Lew Wednesday. “And it’s something that we’re very familiar with because most federal employees have a [TSP] and it’s really the same mechanism.”
Obama said the plan would offer a safe way for citizens who do not have access to an employer-sponsored retirement account to develop a nest egg.
“These account balances will never go down in value,” Obama said at an event Wednesday to promote the program. “They’re backed by the full faith and credit of the United States government. And it’s affordable.”
Workers can contribute through paycheck deductions and can withdraw from the account in an emergency, both options currently provided to federal employees. The G Fund is the TSP’s safest and most popular offering, with 37 percent of the plan’s current assets invested in the Treasury bonds.
All federal employees automatically are enrolled in the TSP with the G Fund serving as the default fund. Feds can opt out of the plan at any time. Obama will suggest the same system for working Americans without an existing account in his forthcoming fiscal 2015 budget proposal, the White House said.