MyRA Account is a new form of retirement plan that the government set up under the auspices of the U.S. Department of the Treasury. They intended it for workers who do not have access to any other form of retirement plan through their workplace and who do not have a convenient vehicle of their own for saving for retirement. It is a Roth IRA and is governed by the Roth IRA rules.
It offers several advantages other forms of retirement accounts do not. There are no fees or costs to set it up or maintain it. The account is automatically invested in a government Treasury fund and pays the simple rate, so there are not any complex investment options or decisions to make. Because it is based in Treasuries of the United States government, there is no risk of losing any money. The Obama administration created and issued this MyRA account plan in 2015.
As with other types of retirement plans and accounts, participants are able to set up automatic payroll contributions to this account. When they change jobs to work for a different company, the account stays with them as it is their own personal retirement account.
The accounts also provide the distinctive advantage in allowing participants to take out the money they placed in the MyRA account whenever they wish. There is no additional tax levied or penalties assessed at any point when they do this. This means that there is no early withdrawal penalty associated with the MyRA accounts, making it more like a savings account than a government approved retirement plan.
Participants in the MyRA Account like that their money is invested in safe U.S. government Treasuries. The investment is fully backed by the United States Treasury. They state that the account will earn (with no risk) an interest rate of 1.5% APR for the month of July 2016. This is based on the Government Securities Fund. This particular fund earned a 2015 average return of 2.04% and a 2.94% average annual return in the ten year period that concluded in December of 2015.
As a starter retirement account, the MyRA account provides the unmatched benefit of no charges to set up or open it and no ongoing maintenance fees for account owners. It also allows savers to contribute any amount they like with no minimum, even $2 contributions. The investments grow with the same tax advantages as a Roth IRA with after tax dollars. This means that the interest and principle will not be taxable when it is withdrawn from the account at any point between now and through retirement.
The MyRA account does come with maximum contribution limits as do all types of retirement savings vehicles. For tax years 2015 and 2016, participants may contribute no more than $5,500 in the year. If they are older than 49 years of age, this amount increases to $6,500 for the year in catch up contribution amounts which the IRS permits. Besides the annual contribution limit amounts, there are also the same lifetime contribution limits that apply to standard Roth IRA accounts.
Critics of this account have warned that this plan represents an all too easy mark and tempting target for the U.S. government if it runs into financing troubles. In the event that Treasury needs ready to access funds, it would not be able to find any that were easier to seize than the ones it is holding itself on behalf of American account holders. They also accuse the government of setting up a plan that props up and creates demand for Treasuries using Americans’ retirement funds as the vehicle to do this.