New myRA Retirement Account
by Chris Cyndecki on February 4th, 2014

President Obama recently signed a presidential memorandum directing the Department of the Treasury to create a new type of retirement account called the “myRA.” 

The myRA account is designed as an introductory savings vehicle for individuals who don’t have access to employer-sponsored retirement plans. If you choose to participate, your employer will deduct contributions from your paycheck. Also, account owners will not have to pay any fees.

Investment Option

The myRA will have only one investment option – a variable interest-rate United States Treasury bond pool. Investors should expect returns similar to those of the Thrift Savings Plan Fund (TSP) for federal employees. The annual return for the TSP fund in 2012 was 1.47%, and the average annual return between 2003 and 2013 was 3.61%.

Tax Structure

Accounts will be structured similar to Roth IRAs. Individuals contribute after-tax money (after paying income taxes), while investment gains and withdrawals are tax-free in retirement. Principal contributions can be taken out at any time without tax consequences. To withdraw earnings, the individual must be over 59 ½ years old and must have made the initial contribution at least 5 years prior to withdrawal (otherwise 10% early withdrawal penalty + income taxes).

Rules

  • $25 minimum initial investment
  • $5 minimum payroll deduction
  • Maximum annual income limitation: $129,000 for singles; $191,000 for couples
  • Maximum contribution of $5,500 per year (or $6,500 if over age 50) in combination with IRAs and Roth IRAs
  • Once the balance reaches $15,000 or has been open for 30 years, the participant will have to roll the account over to a private sector Roth IRA.


Posted in Retirement    Tagged with myRA, retirement, savings


2 Comments

noname - February 5th, 2014 at 7:09 AM
Does the 5500 in combination with Ira and Roth Ira mean the max to all of them combined is 5500?
Chris - February 7th, 2014 at 4:07 PM
That is correct. The combined contribution between a traditional IRA, Roth IRA, and the myRA cannot exceed $5,500 per year (or $6,500 per year if you're over 50 years old).
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