REVIEW: You Can Now Sign Up for Obama’s myRA Retirement Account

You can now sign up for Obama’s myRA retirement account. The real question: Do you actually want to? For a small minority, it makes sense.

In the President’s 2014 State of the Union Address, he unveiled the myRA program designed to help those who do not have access to a retirement plan at work. Yesterday, the program launched nationwide.

This article outlines the basics of the program, which I’ll summarize here. It’s essentially a Roth IRA with a few twists:

Provisions That Are the Same as a Roth IRA

  • Income Limits: Same for eligibility as Roth – Annual gross income less than $131K single/$193K married.
  • Contribution Limits: Same as Roth – $5,500/year if under age 50; $6,500 if 50 or over.
  • Tax Treatment: Same as Roth – Tax-free growth if held until 59½.
  • Withdrawals: Contributions come out tax-free. Earnings are taxed + 10% penalty if under 59½.
  • Transfers: Can be transferred to a private-sector Roth IRA at any point.

Provisions That Are Different from a Roth IRA

  • No fees. No minimums.
  • You can’t lose money. Principal amount is guaranteed by your Uncle Sam.
  • No investment choices. myRAs invest only in the ultra-safe Treasury Securities Fund.
  • Contributions: From your paycheck, bank account, or federal tax refund.
  • Once balance reaches $15,000, or account open for 30 years, it must transfer to Roth IRA.

While there is nothing inherently wrong with the concept of a myRA, it does have some significant shortfalls:

  1. It will appeal to younger folks in jobs without a retirement plan. But treasury securities are probably too conservative for someone with decades to go before retirement.
  2. It does nothing to address the lack of pre-tax retirement plans (like 401k and 403b plans).
  3. Those with access to a 401k can contribute $18K ($24K if 50 or over) vs. $5,500/$6,500 for the myRA

However, for those who lack the self-discipline to open their own Roth IRA and have no company retirement plan, this could be a payroll-driven Roth IRA that actually gets them off the dime!

 

 

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