Thursday, November 5, 2015


In the January 2014 State of the Union address BO called a “myRA” payroll withholding starter retirement account for employees without access to a 401(k) plan.  These accounts are now a reality.

CNBC, announcing the initiation of the program by the Department of the Treasury “very cautiously and with little fanfare” this past April in “Does anyone recall the myRA retirement savings plan?”, describes the new retirement savings account -

The biggest advantage of the myRA proposal is its simplicity.

People can open the accounts with just $25 and can contribute as little as $5 per paycheck through direct deposit. After-tax dollars are contributed to the account, which is set up as a Roth IRA, and the principal and interest earned can be withdrawn at any time without tax or penalty.

Participants can accumulate a maximum of $15,000 in the account, at which point it would be rolled over into a private-sector Roth IRA. If they haven't reached that threshold after 30 years, the account would also be rolled into a private account.”

The official website tells us that the myRA is –

a new type of Roth IRA investment that makes saving for retirement simple, safe, and affordable. Individuals can open a myRA account with no start-up cost and there are no fees for the maintenance of the account. myRA has no minimum contribution requirement, so savers can contribute the amount that best fits their budget. The investment in a myRA is backed by the United States Treasury and the account carries no risk of losing money.”  
As mentioned above, the myRA is a "ROTH" account.  Contributions to this account are not currently tax deductible, but qualified withdrawals, including all earnings, are totally federal and state tax free.  The same $5,500 and $6,500 maximum applies to an Myra account.
Contributions are invested in the Thrift Savings Plan Government Securities Investment Fund (aka the “G” fund).  According to the myRA website, “This fund has had an average annual return of 3.19% over the ten-year period ending December 2014”.

Contributions can now be made directly from your bank account or through direct deposit from employee payroll checks.

The myRA webside explains how create an account (go to this site to set up an account) -

1. Sign up for myRA

First, you will open your myRA account by providing your information online or by phone — it will take about 10 minutes.

2. Set up regular contributions from your paycheck

Give a direct deposit authorization form to your employer. You'll have the option to print one when you open your account, or use the one you receive in the mail with your welcome package. If you want to contribute from multiple jobs, give each employer a form. Some employers may ask you to use their own direct deposit authorization forms.

If your employer has questions about setting up direct deposit to your myRA, you can share a letter we have prepared that explains the process.”

This sounds like a good idea to me.  While the investment choice, and investment return, is limited, the principal is quaranteed.  It is an easy way for a lower income employee, without access to an employer-sponsored retirement plan, to begin to save for retirement. 
And it appears that myRA contributions would qualify for the Retirement Savings Contributions Credit (aka “Savers Credit”).  Click here for a TWTP post that explains this credit.



Chris Johnson, EA said...

I know this isn't a blog related to investing, but I feel compelled to mention that money put into the myRA doesn't have great prospects for growth, considering it is put into a fund consisting of federal government bonds (until it is worth $ 15,000 and gets moved into a Roth IRA). There may have been good intentions with this, but it seems like the federal government could have outsourced some of the investing to a few mutual fund companies like the states do with their 529 college savings plans. I suppose it's better than not doing anything, but many low income and self-employed individuals without access to a 401(k) plan could benefit greatly from even a small amount of money invested in mutual funds that hold stocks and corporate bonds. Yes, it's riskier than government bonds but over a long enough investment horizon you are almost certain to come out ahead.

Robert D Flach said...

CJ -

I do agree that the investment return is very limited.

However the benefit of the myRA is that is allows individuals, especially younger and lower income workers, to start small and put away as little as $5.00 to $10.00 per week, with the principal guaranteed. No other option that I know of would permit such small amounts. A little retirement savings, at the beginning, is certainly better than no retirement savings.

A myRA investor does not have to wait until $15,000 has been accrued before transferring money to a higher-earning option.