By Diana Palmieri
Startling statistics from many different polls show that folks aren’t saving enough for retirement. The polls pinpoint a majority of families choosing to pay bills over putting money into a retirement account. During the last State of the Union address, President Obama introduced the MyRA. So what’s it all about? Here are a few basic points to the plan, according to a White House Fact Sheet:
- Workers who do not have an employer-sponsored plan can contribute to this plan. Employers who do not offer a plan to their employees can offer the MyRA to their employees. Employee contributions are voluntary; there are no matches from employers.
- The MyRA is also available to employees with employer-sponsored accounts subject to certain income limits. Consult your tax advisor for details.
- Similar to the Roth IRA, contributions are not tax deductible, and contributions can be withdrawn at any time tax free. Contributions will be offered through payroll deduction. You can start with a $25 initial investment and add as little as $5 at a time through payroll deductions (not to exceed $5,500 a year).
- The contributions will be invested in the Government Securities Investment Fund (G Fund), which is part of the government employee thrift savings plan. The G fund is comprised of government securities. The downside is the G fund only pays about 2% in interest, so if you are looking for big growth, you won’t find it here. On the flipside, you do have principal protection and virtually no risk.
- If you change jobs, you can take the plan with you.
- Once the plan reaches $15,000 or 30 years, you have to move the plan to a Roth IRA.
There are little to no fees involved to participate in the program and the government, not your employer, handles all the paperwork. For someone who has never saved before, particularly younger part-time workers, this could be a great way to promote and encourage more substantial retirement savings later on. Something else to consider is that the MyRA could also be used as a savings vehicle for a large future purchase like a home, to fund an emergency account, or to help with college education costs. Remember, contributions can come back to you tax free at any time. Earnings can be withdrawn tax free after 59½. Consult your tax advisor for more details.
The MyRA is not the 100-percent surefire way to wholly fund one’s retirement, but I believe it could be a stepping stone to greater savings in the future. If you choose to invest in this plan, always verify with your tax preparer if you are eligible to do so.
This is for information purposes only. For more information, go to www.treasurydirect.gov/readysavegrow, or call (800) 553-2663.
Diana Palmieri is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.
