myRA was announced in President Obama’s 2014 State of the Union address but there were few details at that time. The Treasury Department has the program up and running now at myRA.treasury.gov. Currently, the program is targeted at taxpayers who don’t have access to a retirement plan through work but have an employer who will do a payroll deduction and direct deposit. The employee can contribute as little or as much as they want up to $5,500 a year. There is also an overall limit of $15,000 in the account. Treasury has included a calculator on the website so taxpayers can see how much they will earn depending on the amount and time of investment.
To set up a myRA account, the taxpayer signs up at myRA.treasury.gov. There are income restrictions. Single taxpayers who make over $129,000 or married couples who make over 191,000 a year are not eligible for myRA accounts. Once they have set up their account, the taxpayer downloads the direct deposit form for their employer to start payroll deductions.
myRA accounts are Roth IRA accounts. That means that the money going in is not tax deductible but contributions can be withdrawn tax free. The only tax that will be paid is on the interest the account has earned. As with any Roth IRA plan, myRA is also subject to the early withdraw penalty if the interest is removed before the taxpayer has reached 59 1/2 years old and had the account for 5 years. There is also a limit of $15,000 per account. But the account can be rolled over into another Roth IRA once the balance starts getting high. The myRA contributions are invested federal employee government securities fund (US Bonds and Notes) and the average interest rate for the years 2003 to 2013 was 3.39%.
Currently, myRA is only open to taxpayers who are working for an employer who will do direct deposit of payroll deductions. If they won’t do the deduction or the taxpayer is unemployed or self-employed, the taxpayer can’t contribute to their myRA. Treasury is working on alternatives for people who don’t have employer direct deposit. If a myRA account sounds interesting but you are currently not eligible, keep checking back.
myRA is a good starter plan for taxpayers who don’t have access to a company retirement plan. Hopefully, Treasury will be able to expand the program to include more people, especially the self-employed. To be honest, I would be interested. myRA is paying better than my savings account.