On January 28, 2014, President Obama announced during his State of the Union address that the U.S. Department of the Treasury would develop a Retirement Savings Account called the myRA (“My Retirement Account”). According to their website, www.treasurydirect.gov/readysavegrow, the U.S. Treasury Department hopes to begin rolling out myRAs in late 2014.
MyRAs are Roth IRA accounts available to anyone with annual income below $129,000 for individuals and $191,000 for couples. These limits will be regulated for annual cost-of-living adjustments. MyRAs will earn the same variable interest rate as the Government Securities Investment Fund in the Thrift Savings Plan for federal employees. This fund currently earns 2.25% interest.
These accounts are designed to encourage savings for those workers who don’t currently have a retirement plan available to them.
- $25 to open an account and contributions as low as $5 per payday.
- Automatic payroll deductions.
- No fees.
- Like U.S. savings bonds and other Treasury securities, accounts will be backed by the full faith and credit of the United States.
- Can withdraw contributions tax free at anytime. Earnings on those contributions can only be withdrawn tax free after age 59 ½.
- Contributions not tied to a single employer. Can change jobs or contribute with multiple employers at the same time. It all goes into one account.
Savers may voluntarily roll over myRAs to private-sector retirement accounts at any time. Once the account reaches $15,000, or after 30 years (if earlier), the balance will mandatorily be rolled over to a private-sector retirement account.
How are employers affected? Employers are not required to offer myRA information to their employees. If they decide to participate, Employers will distribute myRA information but will not administer the accounts or contribute any company money to them. On paydays, employers will send a direct deposit to each participating employee’s myRA account based on their payroll deduction.
More information will be forthcoming when the US. Department of the Treasury has finalized the details. In the meantime, if you would like to discuss the new rules, or alternative plans, don’t hesitate to contact us at Retirement Management Services.