Look carefully before buying MyRAs

Article Highlights

  • If the Federal Reserve succeeds in its goal to depreciate by 2% per year, the real return on an account that earns 1.5% annually is negative ½%.

    Tweet This

  • MyRA savers will have accounts worth less in real terms than the money they put in.

    Tweet This

  • A design for MyRAs that would make much more sense would be to have inflation-indexed government debt in these accounts.

    Tweet This

If the Federal Reserve succeeds in its goal to depreciate the purchasing power of the dollar by 2% per year, the real return in the example of a person contributing to an account that earns an annual return of 1.5% is negative ½% per year. At every period the savers will have accounts worth less in real terms than the money they put in.

A design that would make much more sense would be to have inflation-indexed government debt in these accounts. That would protect the savers from the Fed—protection they assuredly need. The program would then be a healthy offset to the Fed's current policy of crushing conservative savers.

Alex J. Pollock
American Enterprise Institute
Washington

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alex J.
Pollock

What's new on AEI

How the Common Core went wrong
image Election countdown: The mood, measurements, and mechanics
image Rubio's defense speech: Fearless, informed, and refreshing
image Sorry Kerry, there is little role for Iran in fighting ISIS
AEI on Facebook
Events Calendar
  • 22
    MON
  • 23
    TUE
  • 24
    WED
  • 25
    THU
  • 26
    FRI
Monday, September 22, 2014 | 2:30 p.m. – 4:00 p.m.
Policy implications of the new US labor market normal

We welcome you to join us as a panel of economists discuss US wage and price prospects in the coming months and the implications for the Federal Reserve’s current unorthodox monetary policy.

Event Registration is Closed
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.