As a way to add to the monetary safety net for the American people, who are living longer but are required to retire later due to financial concerns, Obama has launched a new retirement savings program call myRA. Those who earn less than $131,000 per year, or $193,000 a year if they are married filing taxes jointly, are allowed to start contributing to their plan at any time, with no fee.
While regular IRA accounts sometimes have a minimum amount initially required to open, myRA lets individuals begin saving with mere dollars. It is guaranteed to never lose its value, since it is backed by the government and earns interest through a U.S. Treasury Security that has an averaged 10-year return of 3.19%. It’s not as much of a return as savers could expect to gain from the stock market, but you can rest assured you won’t be losing money ever.
How Do You Sign Up?
If you’re interested in opening an account, all you have to do is go to myRA.gov and enter your name, social security number and either your driver’s license, passport or state or military identification number. There are no fees and no minimum requirements to sign up.
How Do You Make Contributions?
You can make one-time or repeated deductions from a checking or savings account through direct deposit. You can also download a form for your employer that will allow them to deduct a portion of your paycheck and deposit it into your myRA account.
Withdrawal and Savings Limits
While the myRA program is set up similarly to a Roth IRA, since you can make after-tax contributions and withdraw them tax-free in retirement, and you’re allowed to contribute $5,500 per year, the myRA program works a little differently as well. It also functions as a normal savings account. You can withdraw your principal at any time without paying any fees or penalties.
The interest the principal earns however, is subject to the same rules as interest earned through a Roth IRA. Once you have the account open for five years, you can withdraw the interest as well.
The myRA program is designed to be a starter system to get people who would otherwise not save for retirement to begin doing so. Once the balance of a myRA account reaches $15,000, you are required to roll it over to the private sector into an actual IRA, where you will now be able to afford the minimum contributions to open an account and earn a more substantial return than the projected 3.19% earned through the myRA program. There is also a time limit on the myRA accounts. Once you have had yours for 30 years, you have to also move the money to the private sector.
So if you have not yet started saving for retirement, maybe due to the large contributions required to open an IRA or simply because you haven’t found a system you are confident in as of yet, consider giving the new myRA program a try. You can start saving today and be one step closer to a profitable, comfortable retirement.