Unfortunately, many people don't have access to an employer's retirement plan. In response, the U.S. Department of Treasury has created myRA (my Retirement Account) to help people start saving for retirement. This new type of Roth IRA is designed to make it easy and affordable for workers to save. Some of the advantages of the myRA include:
- no fees to open an account;
- no management fees (a big plus);
- no minimum amount needed to start; and
- direct deposit from an automatic deduction from your paycheck.
A myRA investment earns interest at the same rate as investments in the government securities fund available to federal employees. This fund has an average annual return of 3.39% over the 10-year period from December 2003 to December 2013.
The good news is that the investment is backed by the United States Treasury and the account amount will not go down in value (although the return rate is not guaranteed).
The downside is that the return is historically relatively low compared to the possible return from other investments (but with less likely volatility).
Because myRA is a type of Roth IRA, rules exist about when you can withdraw interest earned without paying taxes or penalties. To be eligible to open a myRA account you must be a wage earner without access to a retirement plan at work and earn less than $129,000 per year (less than $191,000 per year if you're a married couple filing jointly).
Like all saving and investing options, myRA has pros and cons as an investment tool and it is not the right strategy for everyone. You need to consider your own situation and compare options when choosing how to save and invest for retirement. Consult with financial professionals to determine what is best for you.
If you are interested in learning more about myRAs, visit https://myra.gov/or call 855-406-6972.