President Obama's myRA Retirement Plan
In his recent State of the Union Address President Obama introduced "MyRA", a government retirement account option that will help millions of Americans start saving for retirement. Class instructor Dorla Evans has sent these links to help us understand the new program:
The myRA savings account is intended for the roughly half of U.S. workers who don’t have access to employer-sponsored retirement plans. It’s a government-run account that will earn the same fluctuating interest rate as the Thrift Savings Plan Government Securities Investment Fund available to federal employees. Contributions, which will be deducted from after-tax pay, won’t be taxed on withdrawal. The purpose is to get people started on a lifetime of savings. Once an account reaches $15,000 it will be rolled over into a private-sector Roth IRA. The myRA plan is so new that some people in Washington are still pronouncing it like the woman’s name. It’s actually three syllables, a play on “I-R-A.”
From CNN Money:
Who can open a myRA? The accounts are targeted at the millions of low- and middle-income Americans who don't have access to employer-sponsored retirement plans. That includes roughly half of all workers and 75% of part-time workers.
How will the account work? The account will function as a Roth IRA, which allows savers to invest after-tax dollars and withdraw the money in retirement tax-free.
How much can I invest? Initial investments can be as low as $25 and workers can contribute as little as $5 at a time through automatic payroll deductions. Like a traditional Roth account, savers will be allowed to contribute up to $5,500 a year under current limits.
What kind of returns can I expect? While the accounts will offer a safe place for many first-time retirement savers to put their money, they shouldn't expect big returns.
Will this help solve the retirement savings crisis? Retirement advocates are cheering the new savings program as an important step. But no one thinks this alone will fix the fact that millions of Americans have little-to-no retirement savings.