Will You Use the New MyRA Retirement Plan?
There’s going to be a new retirement plan in 2014! As part of the President’s State of the Union address he mentioned a new retirement plan called the myRA. While the details are still being flushed out, we are able to get a good idea of what the plan may look like from the The State of the Union and the Fact Sheet released by the White House.
What is a myRA?
The myRA, which stands for my Retirement Account will be a “starter” retirement savings account. The Roth IRA like plan will be invested in savings bonds and aimed at employees who don’t have access to a 401ks or other retirement plans.
MyRA Plan Details
Contributions. MyRA contributions will be voluntary with no matching contributions from the employer. The minimum initial investment will be $25 and minimum contributions after that will be $5.
Investment Options. The money in the myRA account will be invested in U.S. savings bonds, backed by the U.S. government. The returns on the bonds will be similar to the Government Securities Investment Fund (G Fund) which federal employees have access to in their Thrift Savings Plan (TSP).
MyRA Plan Features. The myRa will feature the following:
- Account balances will have principal protection so they will not decrease.
- It will be offered in the form of a Roth IRA account.
- The myRa will be available through employers.
- The accounts will be portable; you can keep the account if you change jobs.
- You can rollover your account to a Roth IRA at any time.
MyRA Eligibility Rules
MyRA Income Limits. Eligibility for the myRA in 2014 will have the same income limits as Roth IRAs: $191,000 a year for married filing joint or $129,000 for single filing status, using your modified adjusted gross income.
In addition, the contributions might Qualify for the Retirement Saver’s Tax Credit depending on how it’s worded.
Withdrawals. Contributions can be withdrawn tax free at any time, but it looks like there could be penalties on the earnings for early withdrawal (similar to Early Roth IRA Withdrawals) before retirement age.
MyRA Plan Limits. The accounts will have a maximum balance of $15,000 or 30 years. Once you reach the maximum, you’ll need to roll it into a regular Roth IRA.
When will it begin? Because the President can use executive action to create the myRA, it won’t have to wait for approval from Congress. Employers in the pilot program will be able to begin offering the plan to employees by the end of the year.
Integration with Current Retirement Plans
I haven’t seen any references yet about how this plan will impact your current Roth IRA or 401k plan limits and contributions. Will it create additional tax deferred space if you already max out your current retirement plans? Or will you have to reduce other plan contributions in order to participate? Either way, access to savings bonds in a Roth may be a nice benefit if you need additional options in your tax deferred asset allocation for fixed income.
While most of the information was obtained directly from the White House, I will continue to add additional details as they are released and update any assumptions once they become fact.
Will you use the new myRA retirement plan?
If the government can improve its position with regards to its spending and its debt, I would be in favour of this … otherwise, having an insolvent organization back a program like this makes for a dubious investment…
The accounts will have a maximum balance of $15,000 or 30 years! Interesting!
While this plan is better than most 401ks which do not have any really safe investment choices, it is still a long way from perfect. First, I am suspicious of all these plans which allow my employer to know how much of my salary I am saving. This is private information which I do not care to share with someone who has an awful lot of control over my finances already. Second, why the $15,000 limit? We are always being pushed to give our money to Wall Street, and I guess at the $15,000 level they might be happy to get their hands on it. I would prefer a plan which lumps all the 401k and IRA contribution limits together but allows you to choose to put all of your contributions into an IRA if you choose. (A nice confidential IRA which your boss doesn’t need to know anything about.)