Employees Not Saving for Retirement May Embrace myRAs as Starting Point



No retirement account, no problem: The Obama administration has launched a program for some individuals to create an after-tax individual retirement account.

The program, My Retirement Account or myRA, was made available as a type of Roth IRA applied for through the federal government on Nov. 4. Eligible participants must have taxable income; single taxpayers must earn less than $131,000 per year; and married couples filing jointly must earn less than $193,000 per year. For 2015, myRA participants can contribute up to $5,500 per year or $6,500 per year for those 50 or older.

The Treasury Department developed the framework for the program, including creating a new Treasury savings bond to serve as the underlying investment for the accounts, as well as designating a financial agent to help Treasury administer the accounts and set up a simple way for savers to fund their accounts through their employers, the department said.

As for MyRA limitations, a participant's account must be transferred to a private sector Roth IRA in the event that an employee's account reaches the maximum allowable amount of $15,000 or reaches the maximum longevity limit of 30 years (even with a balance of less than $15,000).

Under most circumstances, employees can at any time withdraw, transfer, or roll over myRA funds into a private sector Roth IRA without paying taxes or penalties.

According to a Treasury factsheet, employees who invest through myRAs are not subject to risks of losing money, since myRA funds are invested only in guaranteed U.S. Treasury securities (myRA-A New Retirement Savings Account).

Some myRA features that may be especially attractive to employees who previously have avoided retirement savings participation are that there are no costs or fees for opening or maintaining accounts and no minimum contributions. MyRAs also have been designed for convenience by allowing participants to make contributions through periodic, automatic direct deposits from their employers; one-time or multiple scheduled transfers from checking or savings accounts, or transfers of all or portions of federal tax refunds.

In a Oct. 22, 2015 letter, the AARP urged Treasury to reconsider its stance mandating the transfer of myRAs to another savings vehicle once they reach the $15,000 threshold.  AARP further expressed concern that forcing myRA participants to move to another savings vehicle may place them in a position where they would not reap similar financial benefits. AARP also especially felt that myRA participants age 59 ½ and over should be allowed to exceed the $15,000 limit, since they would be closer to retirement and subject to be more adversely affected from sustaining a financial loss. 

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