During the 2014 State of the Union Address, President Obama proposed a new retirement savings plan for low-to-medium income workers that “guarantees a decent return with no risk of losing what you put in.” The plan is meant to fill a niche for individuals who do not qualify for, or are not interested in, a traditional Roth IRA. There are a few rules for setting up a MyRA account: MyRA investors must earn less than $191,000 annually, have electronic payroll payments set up, and investors must fund the account with a minimum of $25 and contribute $5 out of every paycheck
- The account is allocated to the employee, not the employer so that if the worker changes jobs, there will be no money lost in transferring the fund to a different account.
- Investments are guaranteed by the government and can never go below the initial investment.
- Interest earned in the MyRA is tax free.
Cons of MyRA
- A maximum of $15,000 can be put in a MyRA account.
- Funds after $15,000 must be transferred to a traditional IRA.
- The rate of return is very low–possibly under 2%.Money invested is after-tax.
While the MyRA is certainly not a panacea for our nation’s lack of preparation for retirement, it can be a step in the right direction for workers who have not yet begun the process of building their nest egg. The truth is, investing for retirement is complicated. For Americans who do not have access to retirement plans at work, 50% of all workers and 75% of part-time workers, building a suitable portfolio for retirement investment is nearly impossible. The proposed MyRA retirement savings plan is not for everyone, but for millions of Americans, it’s the goose that lays golden nest egg.