Meet the myRA
A new no-fee, no-minimum-deposit retirement savings program.
Provided by Mike Fassi, CLU, CHFC
Website: Fassi Financial
You know you need to save for retirement. You know you need to start sooner rather than later, but do you have a way to begin?
If your employer does not offer a retirement plan, that takes away a potential opportunity to save. Opening an investment account, even an IRA, often requires $1,000 or more. Is there a way you can just start saving for retirement here and now, a more convenient way?
Now there is, because the myRA is now reality. This retirement account, introduced in November 2015, is giving many more Americans a chance to build retirement savings.
The myRA makes saving for the future easy. You can open one even if you have nothing to put in it. You can do it online or with the help of a financial professional; all you need is a Social Security number and either a driver’s license, a state or military I.D. number, or a U.S. passport. A myRA requires no minimum investment to start and no monthly minimum investment when the account is up and running. Under current limits, you can contribute up to $5,500 per year to a myRA, $6,500 per year if you are 50 or older.1
Some myRA owners like to deposit money in their myRA each month from a checking or savings account. Others arrange a per-paycheck direct deposit. If your employer will let you do a direct deposit, you can fill out a form at myra.gov/files/myra-direct-deposit-form.pdf to get that going. Some or all of your federal tax refund can also be directed into your myRA at your request; however, the refund amount does count toward the yearly myRA contribution limit.1
Every myRA is backed by the federal government. Essentially, a myRA is a new kind of Roth IRA in which the assets are invested totally in federal savings bonds (the assets go into the U.S. Treasury Government Securities Investment Fund, or GSIF). The interest rate on the bonds held in the GSIF varies per month, but across the ten years ending in 2015, it averaged 2.94% a year.1,2
A myRA has no investment fees or account fees. This is remarkable, because retirement savings accounts usually come with such charges. Although these fees are very minor, they effectively eat into the account returns over time.1
There is an income ceiling on myRA participation. You have to earn less than $131,000 a year to have a myRA (or less than $193,000 a year in the case of a married couple).1
Think of a myRA as a first step in retirement saving. When it comes to accumulating money for retirement, time is your biggest ally. The earlier you begin, the more years your invested assets have to grow and compound.
Many people decide to start saving for retirement “later.” That is almost always a bad decision, because in many cases “later” ends up being “much later” and sometimes just “too late”. Many procrastinators believe they need to put off building a retirement fund until they make more money. With a myRA, you can start saving now rather than wait.
When your myRA balance tops $15,000, you must move the money into a regular Roth IRA (or if you wish, another kind of retirement account offered by an investment firm). At that point, you can direct those retirement assets into different investment classes. Many people own Roth IRAs, and for good reason: while your contributions to a Roth IRA are not tax-deductible, your withdrawals become tax-free when you are age 59½ or older and have held the account for longer than five years.1,3
The bottom line? A myRA is a convenient way to start saving for retirement. It should not be your only retirement account, but it could be your first, and it could put you on a path toward saving the money you need for the future.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – cbsnews.com/news/q-a-how-myra-a-new-retirement-account-works/ [11/4/15]
2 – tsp.gov/InvestmentFunds/FundOptions/fundPerformance_G_Perf.html [3/29/16]
3 – bankrate.com/finance/retirement/traditional-ira-vs-roth-ira-1.aspx [1/1/16]