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:
- 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.
- It does nothing to address the lack of pre-tax retirement plans (like 401k and 403b plans).
- 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!
McLean Asset Management Corporation (MAMC) is a SEC registered investment adviser. The content of this publication reflects the views of McLean Asset Management Corporation (MAMC) and sources deemed by MAMC to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.
The information throughout this presentation, whether stock quotes, charts, articles, or any other statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission there of to the user. MAMC only transacts business in states where it is properly registered, or excluded or exempted from registration requirements. It does not provide tax, legal, or accounting advice. The information contained in this presentation does not take into account your particular investment objectives, financial situation, or needs, and you should, in considering this material, discuss your individual circumstances with professionals in those areas before making any decisions.