Do you want to save for retirement but don’t have access to an employer-offered plan? Recently, President Obama announced a new retirement savings program known as myRA that could help you get started on setting aside a nest egg.
Who qualifies?
If your household makes less than $191,000 per year, or you as an individual make less than $129,000, you are eligible to take advantage of the myRA program. You will need to make an initial investment of at least $25 and you will need to continue to make regular contributions.
What are the limits?
Like a Roth Individual Retirement Account (IRA), contributions to a myRA are limited to $5,500. Also, when your balance reaches a total of $15,000 you are required to transfer money to a Roth IRA.
What are the potential advantages?
In a myRA, your investment is guaranteed to never go down. Plus, you will earn more than you would by putting the money into a regular savings account. While you will be able to set up automatic contributions from your paycheck into a myRA, the plan won’t be tied to a particular employer, so you won’t have to worry about extra paperwork or tax consequences if you change jobs.
What are the potential disadvantages?
The investment choices will be nonexistent for myRA accounts and your growth potential will be small. For that reason, it is better thought of as a savings vehicle rather than an investment account.
Since the myRA is structured similarly to a Roth IRA, your better option may be to contact your financial institution to set up an IRA account and gain greater growth potential and more investment choices.
How do I get started?
Details on how you will be able to open a myRA will be released later in 2014.
It’s important to know that because of the limited growth potential for your investment, a myRA plan shouldn’t be thought of as a primary retirement vehicle. Instead, think of it as a way to jumpstart savings with the goal of eventually transferring the funds into a more appropriate retirement savings vehicle, like an IRA.
