In 2014, the U.S. Department of the Treasury launched a new retirement savings program called myRA (My Retirement Account). The program is specifically designed for new savers who might not be able to afford minimum deposit requirements in other types of retirement savings plans, or for savers who might not have available to them a retirement savings plan through their employer. Technically a Roth IRA, contributions are made on an after-tax basis, grow tax-free, and are later withdrawn tax-free.
The key features are as follows:
- There are no initial or ongoing fees to save in a myRA account.
Minimum Contribution Amounts
- There are no minimum contribution requirements.
Maximum Contribution Amounts
- One can save up to $15,000 or keep money in the account for 30 years, whichever comes earlier.
How Are the Funds Invested?
- According to the myRA website, “The money you put in your myRA account is invested in a United States Treasury savings bond, that safely earns interest at the same variable rate as investments in the Government Securities Fund for federal employees. The return for these investments was 2.31% in 2014 and 3.19% over the ten-year period ending December 2014. Past performance is not a guarantee of or prediction of current or future performance.”
Our Take on myRA: Pros
- With one in two Americans not saving anything for retirement, there is a great need for Americans to save more for retirement. Any encouragement for people to save more is always welcomed.
- The plan is very simple. Savers can sign up online, have funds deposited via payroll deduction, and employers can easily set up a myRA plan for employees.
- We can see this being a helpful benefit for employers who want to offer a retirement plan, but who don’t yet have one, or for employers who want to offer a benefit to new employees who aren’t yet eligible for the employer’s existing plan.
- The plan is guaranteed not to decrease in value.
- No fees and no minimum contributions are a definite plus.
Our Take on myRA: Cons
- A savings bond is not sufficient to help people save for retirement. For most people to stand a reasonable chance of retiring with enough money to replace their income, investors need to have at least some of their retirement nest eggs placed in investments that have the possibility of earning a higher rate of return. A rate of return in the 2%-3% range is not enough to ensure that retirement savings will keep pace with inflation. This one disadvantage is significant, especially when one considers that other Roth IRA plans with more investment options can be opened with no minimum contribution amounts. Even our own IRA accounts at Dunston Financial Group can be opened with no minimum contribution requirement and only a $25 annual account fee.
Some retirement savings is always better than none; therefore, we recommend the myRA account if one has no other retirement savings options. If one can open a similar account through a company that offers more investment options, however, then this would more than likely be a better option.