There is a new account that the government will be releasing soon to entice people to save more money. Its called MyRA and it obviously stands for My Retirement Account, I must say it is very catchy phrase. The government is backing it with full faith treasury bonds. Does this mean the government will take on more debt?
The New MyRA Account:
Employer must sign up for the program
You must have Direct Deposit
It will have a 191K household income limit
There is no match and you can put in up to $5500 a year.
It is not invested in the Stock Market aka No Risk
The funds will be invested in Govt. Bonds aka like TSP Plans
$25 minimum investment to start
You can contribute to a MyRA and 401K and other retirement accounts offered
If the account reaches 15K or 30 years, then it must be rolled into a Roth IRA
Expect to earn around 1-3%, with no loss to principal.
You can withdraw funds at any time with no taxes or penalties (Emergency Account)
Must wait till 59.5 to withdraw any earnings on money with no taxes or penalties at all.
Is it better than a regular savings account at a bank, yes. (Anything is better than .25 interest rates) But how different is it than just buying regular government bonds on the treasury direct website? Well the main difference is the tax implications I assume. For bonds purchased directly you have to pay taxes on any interest earned in the time frame you held the bond. Given that Americans are saving less than 5% based off annual income, it is a step forward to help people save more. This will also hopefully help millions avoid living a paycheck to paycheck life.
One of the negatives I see is that you have to roll it over to Roth IRA when it reaches 15 thousand, that shouldn’t be the case because maybe people want to be diversified and not have so much risk in the equity markets. Another negative I see is that if they want people to save more dollars, why not offer an interest rate plus inflation protection. So every year the MyRA should match what inflation was that year and then give an addition 1-2% above in earnings. This to me makes more sense, instead having millions of citizens lose purchasing power with the money invested in MyRA. In any event be on the look out for this program to be enrolled at your employer towards the end of 2014.
Comment if you have heard any news behind the new MyRA account?
Comment if you feel this will be a good or a bad thing for your finances?
Rich Uncle EL
I never heard anything other meaning of Myra instead of the medicine. That's nice your government has made that plan. At least people can save more money.
Yes it will help people save more, hopefully.
Interesting…Sounds like a hybrid of a 401K and a Roth IRA. Do you know what kinds of fees are associated with these MyRA accounts. At the end of the day, fees have a huge impact on the size of your retirement nest. Even a 1/4 or 1/2 percent a year makes a huge difference.
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