According to a 2015 Federal Reserve Report, 31 percent of non-retired individuals said they have no retirement savings or pension whatsoever. Among workers who do not participate in a 401(k) or other defined contribution plan, 42 percent say it’s because their employer does not offer one. And a 2015 BLS Economic Release found that 62 percent of part-time workers don’t have access to a retirement plan at work.
Pretty dismal, and something the government is looking to fix. On Wednesday, the Treasury Department officially released the myRA program.
Announced to great fanfare in President Obama’s 2014 State of the Union address, the Treasury Department has spent the time since developing myRA program. This year, it “worked with a small, diverse group of employers as part of the pilot phase of myRA to get feedback and ensure that the user experience is simple and straightforward.”
Now up and running, myRA has three ways to begin saving:
- Paycheck. Set up automatic direct deposit contributions to myRA through an employer.
- Checking or savings account. Set up recurring or one-time contributions from a checking or savings account.
- Federal tax refund. When you file your taxes, direct all or a portion of a federal tax refund to your myRA.
“myRA is designed to remove common barriers to saving, and give people an easy way to get started,” U.S. Treasury Secretary Jacob J. Lew said in a statement. “myRA has no fees, no risk of losing money and no minimum balance or contribution requirements. To make saving easier than ever, you can now put savings into a myRA directly from your bank account.”
myRA is “a starter retirement account” to help bridge the savings gap for many of these workers. It is optimized to appeal to first-time savers, for whom a no-risk, principal-protected investment is more appealing than a higher-risk investment option. As myRA account holders grow their savings, they have the option to transfer to a private-sector Roth IRA with diverse investment options at any time, or transfer to a private-sector Roth IRA once they reach the maximum myRA balance of $15,000.
myRA is a Roth IRA and follows the same eligibility requirements. To participate in myRA, savers (or their spouses, if married filing jointly) must have taxable compensation to be eligible to contribute to a myRA account and be within the Roth IRA income guidelines. Savers can contribute to their myRA accounts as little as a few dollars up to $5,500 per year (or $6,500 per year for individuals who will be 50 years of age or older at the end of the year). Savers can also withdraw money they put into their myRA accounts tax-free and without penalty at any time. Roth IRA requirements apply to the tax free withdrawal of any earnings.
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