This is the Cato Daily Podcast for Wednesday, March 5th, 2014. I'm Caleb Brown.

The President's new My R.A. proposal is meant to target people without 401k's and without the cash to open traditional

IRAs.

But it's not clear exactly what gap the My R.A. is supposed to fill.

Chuckadish Goklay is a senior fellow at the Cato Institute, he explains.

It's supposed to be just like an IRA, except it's a Roth IRA, it's not a regular IRA because you contribute money from

after tax earnings, not before tax earnings.

And that could be a problem because people who will participate or who are targeted for this program are low income individuals.

And low income individuals generally or low savers traditionally.

This program tries to get people to save for their retirement

and not arrive at retirement with very low funds and therefore be financially vulnerable.

But such folks who find it difficult to save are either highly impatient or they have other consumption needs that must be met.

They might be paying for their kids education or, you know, if they have low income, they have to spend a lot on day-to-day living.

They live from paycheck to paycheck.

So there's not much scope for saving.

So there's attractive investment opportunity is intended to get them to save.

But it's attractive in a kind of weird way.

It doesn't give them a tax break immediately.

It requires them to save out of after tax money,

which is going to be difficult.

So I think the program should have been

designed to provide a choice between regular versus Roth or saving from before tax versus after tax and let people choose what they want to do.

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