myRA Launches Nationwide – Another Retirement Savings Vehicle?
Last month the government went live with the myRA (my Retirement Account) program across the country. The program has been in “beta” testing mode with about 60 employers for nearly a year now. Anyone eligible for the myRA account may sign up at www.myra.gov.
The myRA account is basically a Roth IRA (which we absolutely love for a large number of our clients). To participate in the plan, you must have adjusted gross income less than $131,000 (individuals) or $193,000 (married filing jointly) for the tax year 2015.
How does the myRA plan work?
The myRA plan is designed to be a sort of “starter” retirement savings account. People who don’t have access to a retirement plan in their workplace can participate. It’s a pretty simple plan, the myRA investment options aren’t complicated at all. In fact your investment earns the same rate as the government securities fund for federal employees. The return isn’t great, but the federal thrift savings plan is a pretty good one all around.
The biggest draw to the myRA is it’s simplicity. There aren’t any fees, no minimum balances or contribution amounts. It’s about as simple as you can get for a starter type of retirement savings plan.
How do you fund a myRA account?
You can fund your account through automatic bank drafts or through your paycheck at work. You can even fund it from your tax return if you so choose. Using your tax return to fund a myRA is much better than blowing it on wheels for your car or a new sofa!
Once your account gets to $15,000 (or after 30 years) the account must be moved into a regular Roth IRA. You can open a Roth at any major custodian or bank and transfer the myRA easily.
While your employer CAN match your myRA savings contributions to some extent, it’s unclear – and unlikely – that this will be a popular option. Any employer matching an employees myRA account would be better off starting a simple IRA or even a 401(k) plan.
It’s important to note that the myRA is NOT a replacement for your 401(k) plan or other retirement savings vehicle. myRA is more of an additional savings option or a starter plan for those without other retirement savings options available.
My take on the myRA?
I think if you have nothing better – go for it! But even a Roth IRA at Vanguard can be started for as little as $3,000. Other custodians have no minimum investment for a Roth IRA. The fact that the myRA is limited to government bonds kills this deal in my mind. I see no point that a “starter” retirement saver would limit themselves to the measly return of government bonds.
Consider all of your other investment and savings options. Even consider a health savings account if you have a high deductible health plan. There are plenty of ways to sock away some hard earned money for your retirement. And after all, shouldn’t your money work as hard for you as you worked for it?