This free savings option with modest guaranteed returns is intended to help millions of Americans who do not have access to workplace-sponsored retirement plans. Find out if you're eligible.
Many Americans struggle to save for retirement. But building a nest egg can be especially difficult, if not seemingly impossible, for the tens of millions of workers who don’t have access to employer-sponsored retirement plans. That’s about to change.
My Retirement Account, known as myRA, the U.S. government’s new free, no-risk retirement savings plan, was created to help Americans who don’t have access to a 401(k) or other savings plan at work to start saving. Nearly half of all workers in the United States and 75 percent of part-time employees don’t have a retirement plan at work, according to CNN Money.
“MyRA is designed to remove common barriers to saving, and give people an easy way to get started,” said U.S. Treasury Secretary Jacob J. Lew in an statement emailed to Bloomberg. “MyRA has no fees, no risk of losing money and no minimum balance or contribution requirements.”
Here’s what you should know about the new myRA:
- What is it? A myRA is basically a starter Roth Individual Retirement Account (IRA). It allows you to invest after-tax money that can be withdrawn, tax-free, in retirement.
- Who is eligible? Americans who earn less than $131,000 annually, or $193,000 for married couples, can start a myRA.
- How much does it cost? It’s free! There are no startup costs or fees. There is also no minimum contribution requirement, so you can donate weekly, monthly or even annually. It’s up to you.
- How does it work? You can contribute money from your paycheck, bank account or even your federal tax refund to your government-backed myRA account. You can make contributions of up to $5,500 per year or $6,500 per year if you’re 50 or older. The maximum account balance is $15,000.
- What do you mean, it’s risk-free? MyRA contributions are invested in a U.S. Treasury security that is guaranteed to never lose value. Although the interest earned on a myRA is the same as investing in the Government Securities Fund, which earned an average return of 3.19 percent from 2004 to 2014, the current rate is just more than 2 percent. A myRA “won’t return nearly what a stock fund is likely to return over time, but workers face no risk of losing their nest egg,” Bloomberg explained.
- Is this all I’ll need to retire? The government said a myRA is intended to help people start saving for retirement, “but it is not intended to be the only way they save for retirement.” A shocking 1 in 3 U.S. adults has no money saved for retirement. The max account balance on a myRA is $15,000, although you can keep a lower balance for up to 30 years. “When either of those limits is reached, savings will be transferred or rolled over into a private-sector Roth IRA where people can continue to grow their savings,” the myRA website said.
“This has been a long time in coming,” Olivia Mitchell, professor of business economics and public policy at the Wharton School and director of the Pension Research Council, told Bloomberg. “Yet it’s just a first step, and more needs to be done to enhance retirement security for an ever longer-lived population.”
If you don’t want to outlive your retirement savings, check out “6 Ways to Ensure Enough Money for Retirement.”
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