While I think myRAs are a good idea for many people who haven’t started saving for retirement, I do have one concern: The government’s making it awfully easy to pull the money out before retirement. More than 40% of people who don’t have a 401(k) say it’s because their job doesn’t offer one, and more than 60% of part-time workers don’t have employer-backed retirement accounts. The accounts are available for individuals who earn less than $131,000 a year, or $193,000 for married couples. Interest earned on the accounts is at the same rate as investments in the Government Securities Fund, which over the past five years has averaged about 2%, officials said.
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The U.S. Department of Treasury has announced the national launch of the myRA program.
To set up a myRA on your own, go to the myRA.gov enrollment site operated by Comerica Bank, the financial agent of the Treasury that’s responsible for administering myRA accounts. By comparison, according to the Treasury Department, other retirement accounts commonly require minimum balances of $1,000 or $2,000.
The myRA is President Barack Obama’s answer to the country’s ongoing struggle to save for retirement, a problem that can at least partially be blamed on limited access to employer-sponsored retirement plans, such as 401(k)s, particularly for low earners.
“Once people start saving they’re likely to continue”, said Treasury Secretary Jack Lew in a video statement. “MyRA alone will not solve the nation’s retirement savings gap, but it will be an important steppingstone for encouraging and creating a nation of savers”. A USA Today story said that when Norton’s Flowers & Gifts in Ypsilanti, Mich., offered myRAs to its 21 employees during the pilot, six signed up. Like a regular Roth IRA, workers contribute up to $5,500 a year or $6,500 a year for people 50 and older. The account, called a myRA, has no fees, no minimum balance, no risk of losing money and it doesn’t have to be linked to an employer. Workers can contribute to it through automatic payroll deductions or make direct deposits from a checking or savings account. But investment gains can build up tax free, and withdrawals are tax free in retirement. When the earlier of either event occurs, a transfer to a private-sector Roth IRA is mandatory, and a transfer may be made at any time previously. Or, you can direct a few of your federal tax refund to the account. So you’ll never lose any of the money you put into it.
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Kelly Schmidt, North Dakota state treasurer, told participants at the summit, “If we don’t find a way to get people to set aside money for retirement, social services will have to step in for retirees, and we will pay more in the long run”.
