Last Updated Jul 28, 2017 2:18 PM EDT
The Trump administration is killing a federal program aimed at helping lower-income workers save for retirement less than two years after it was launched.
The U.S. Treasury Department announced on Friday that it is pulling the plug on the myRA program after determining that it is "not cost effective." It's being eliminated as part of a broader review of existing programs. The government has spent about $70 million since 2014 to set up, promote and run the myRA program, the Treasury said; shutting it down will save about $10 million a year.
Theprogram was by former President Barack Obama's administration to encourage saving among the roughly 55 million people who lack access to a retirement plan through their jobs. It was touted as a risk-free "starter" account that would earn a guaranteed, though low, investment return. Unlike other retirement vehicles, myRA had no fees or minimum balance requirements, and did not penalize savers for withdrawing funds early.
Since myRA launched in November of 2015, about 30,000 people signed up for an account, with 20,000 of those accounts having some money in them. The median account balance is $500, the Treasury said.
"The program wasn't a panacea to the retirement crisis, but it certainly helped people who used it," Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School, told CBS MoneyWatch. "This is yet another way Republicans seem to be siding with the retail financial management industry against people who want a secure and effective way to save."
Some financial experts criticized myRA for having a low ceiling on savings -- holdings of over $15,000 had to be transferred to a private account -- and for offering only one conservative investment choice.
But retirement experts noted that myRA helped people left out of the financial system to get into the habit of saving, and offered an alternative to high-cost, complicated financial instruments.
The more pressing problem myRA has helped to address is Americans' lack of emergency savings, Ghilarducci said, noting
that it also encouraged workers to start saving earlier in their careers. Workers who lack access to employer-based retirement plans are more likely to be younger, and precisely the group who benefit most from putting aside money.
"If they save a dollar today, it will grow by five times by the time they reach 65. If you start at 50, it's going to grow by 50 cents," she said
The slow uptake of myRA was due in part to a lack of publicity, as well as the relatively short time the program was in existence, said Anthony Webb, research director at the New School's Retirement Equity Lab.
"Academic research shows that having a default is really, really powerful," he said. "If you have to actively go out and track down one of these things, most people don't bother."
Earlier this month, a group of Democratic senators wrote to ask the Treasury to "demonstrate its commitment" to the program. It's unclear what the agency's response was.