MyRA Savings Plans
President Obama signed into law on November 4th, 2015 legislation giving all Americans having a household income of $191,000 or less a year and who do not have access to an employer-sponsored retirement plan, the option of creating a new type of savings plan dubbed myRA (which stands for My Retirement Account). Instead of having depositors choose from a variety of investments available in the marketplace, myRA establishes a fund that invests in a government-managed program guaranteed by taxpayers.
The myRA plan follows the same rules as Roth IRA plans and thus there are limits on the amount that can be funded each year.
MyRA investors can have a maximum account balance of $15,000 for a term of up to thirty (30) years. When either of those limits is reached, your savings will be transferred or rolled over into a private-sector Roth IRA where you can continue to grow your savings. The myRA is designed to offer a simple, safe, and affordable way for people, especially those who don’t have access to a retirement savings plan at work, to get started. As a type of Roth IRA retirement savings account, the myRA can be established with no start-up cost and no fees. The myRA has no minimum contribution requirement, so you can contribute the amount that best fits your budget.
Contributions to myRA accounts are invested in a new United States Treasury security, which safely earns interest at the same variable rate as investments in the government securities fund for federal employees. This investment is backed by the United States Treasury and the account carries no risk of losing money. People can fund their myRA account directly from their paycheck, or from a personal account, such as a checking or savings account, or by directing some or all of their federal tax refund to their account when they file their taxes.
Perhaps the largest complaint about myRA plans is the low rate of return. It is questionable whether many investors are going to be motivated to save more in response to a government plan that offers a small 1.5 percent return.
Mark A. Krohn, a partner, is in charge of the Business Law Team and is also a member of the Trust & Estates Team. He can be reached by phone at our Walden, NY office at 866-303-9595 toll free or 845-764-9656 and by email.