It appears that the US Department of the Treasury isn’t happy with the fact that millions of Americans aren’t saving, or saving enough, for retirement and so they have come up with a new way to try to combat this and encourage people to start saving with the introduction of myRA.
myRA is essentially a roth IRA saving account that allows people to contribute up the maximum allowed per year for Roth IRAs ($5,500 or $6,500 per for year for those age 50 and over). The main difference, though, is that it’s designed specifically for new retirement savers who don’t yet have a current employee retirement plan, it costs nothing to open, has no fees, no risk of loosing money and allows savers to contribute any amount they choose from just a $1.00 up to the maximum allowed.
Note that there are limitations in that people can only save a maximum of $15,000 or a lower balance for up to 30 years, at which point their savings will need to be transferred or rolled over into a private sector Roth IRA.
Contributions, they say, are invested in a new United States Treasury security which earns interest at the same variable rate as investments in the Government Securities Investment Fund in the Thrift Savings Plan for federal employees. Their website states this fund earned 2.31% in 2014 and an average annual return of 3.19% over the ten-year period ending December 2014.
myRA allows people to fund their account in a variety of different ways such as their paycheck, checking or savings account or even all or part of their federal tax refund.
myRA makes it perfectly clear on their website that this form of savings is not meant as a replacement for 401(k)s or other types of employer-sponsored retirement savings plans as it lacks many features of these plans, such as matching contributions and investment options, which remain a great benefit for those with access to such plans. It does, however, encourage employers lacking retirement plans to share myRA information with their employees and has a complete employer resource section on their website.
You can learn more about myRA works on their website or by viewing the video below.