MyRA – an Individual Retirement Account (IRA) for people without access to one-is the government’s way of encouraging saving.
After a pilot project, myRAs are now a reality. According to CNN, “The U.S. Treasury…says anyone who has direct deposit for their paycheck can sign up and start saving now.”
In this program, anyone with a household income below $191,000 a year can open a myRA. Employers don’t contribute; workers do. Minimum initial investments may be as low as $25, with additional contributions as low as $5, if they’re automatic payroll deductions. Savers will be able to contribute up to $5,500 a year.
The money in the myRA accounts will be invested solely in government savings bonds, backed by the U.S. government-account holders can never lose their initial investment. The accounts are expected to earn the same rate as the Thrift Savings Plan’s Government Securities Investment Fund that federal workers can access. The latest data available indicates its 10-year average annual return was 3.4% as of December 2013.
Otherwise, the account functions like a Roth IRA. In other words, you invest after-tax dollars, but when you withdraw the money in retirement (likely when your income is lower) it will be tax-free.
And you’ll have the option to switch to a private-sector Roth IRA at any time. Once your account balance reaches $15,000 or the account has been open for 30 years, it will automatically be rolled over to a private-sector Roth IRA, where the money can continue to grow tax-free.