This past November the United States Department of the Treasury created a retirement savings bond called “myRA”. The savings bond is a Roth Individual Retirement Account (IRA) that is intended to be a starter retirement account for anyone that doesn’t want to lose money. Should be an easy sell, right?
Since this program is new, this is the first year that taxpayers can open a myRA account and direct their tax refund to this account. Because the government already has your money, this makes the account fairly easy to open without any out of pocket investment in addition to your tax withholdings. Other contribution methods are available such as direct deposit and payroll contributions. The myRA account is a Roth IRA backed by the US Treasury and guaranteed to not lose money.
MyRA It is intended to be a simple and safe retirement account for taxpayers who may not have retirement options available through their work or are concerned about the complications and costs of opening a private retirement account. However, you may still open a myRA account even if you already have other investment products.
You can also transfer or roll over the money you save with myRA to a private-sector Roth IRA at any time. However, there are caps and limits on the myRA account. Money invested in myRA will earn interest until the account reaches $15,000 or 30 years have elapsed from the day the account was first funded, whichever is first. At that time, the account balance will then be transferred to a private-sector Roth IRA, where you can continue to invest your savings and make additional contributions, should you want to.
Funds invested in myRA will earn interest at the same variable rate as investments in the Government Securities Fund for federal employees. Although the bond is guaranteed to not lose money, there is no guarantee of future performance.
If you chose to place your tax refund into a myRA account instead of your own bank account, you can still withdraw your funds if you need to. Withdrawals of your contributions can be made at any time without an additional tax or penalty. However, the interest you earn on the account can only be withdrawn under certain conditions and timeframes.
Lastly, the myRA account has no fees or minimum contribution requirement. So if you are expecting a refund this tax season, and have been meaning to save a little bit of money for your future, make this the year you don’t put it off until next year.
This article is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.