President Obama recently announced plans to create a new retirement account backed by the United States government. The primary objective of the plan is to provide Americans with another option to save for retirement if their employer doesn’t provide a plan. While the plan offers certain benefits, it’s definitely not for everyone. Find out if this plan is right for you.
What is a myRA retirement account?
This retirement account is very similar to a Roth IRA in that the contributions to the plan will grow tax-free provided that the holder doesn’t withdraw from the account until they reach the age of 59 1/2. In addition, the maximum contribution limits of the lesser of $5,500 or your compensation will apply to this account as it does for a Roth IRA. However, there will not be an early withdrawal penalty of 10% of the earnings if the holder withdraws before reaching 59 1/2 as is the case with Roth IRAs and there will not be a fee for opening an account.
Another key benefit is that the account is backed by the United States government. This means that you effectively cannot lose your investment in the account. Having said that, low risk investments typically translate into low returns. Specifically, the accounts will be pegged to the same interest rates as the Thrift Savings Plan’s Government Securities Investment Fund, which offers annual returns of 1-3%. The returns will compound over time and you’ll have the tax-free benefit, but when you factor in inflation, the returns are minimal.
Who is eligible for the account?
The President intends to launch the myRA accounts for those that aren’t offered a retirement plan by their employer and earn less than $191,000 annually. This myRA account could cover roughly half of all full-time employees and over three quarters of all part-time workers.
Are there any restrictions?
Yes, once the account grows to $15,000 or it’s been open for 30 years, whichever occurs sooner, the myRA must be rolled over into a private-sector Roth IRA. As such, accounts can be taken by the employee from one job to the next, and they can be rolled into an Individual Retirement Account at any time.
More Questions? Ask your ira tax questions online.
Related Articles
->Why You Should Contribute To Your IRA In January
->Should I Contribute To A Traditional Or Roth 401(K)?
->The IRS Is Enforcing IRA Minimum Required Distribution Rules
->Can I Withdraw From My IRA And 401(K) To Pay For A Down Payment?
->What Exactly Are The Penalties For Withdrawing From Your Roth IRA?
->How Much Can I Contribute To My 401K And IRA In 2013?
->Do You Know the Fees For Your 401(K) Plan?
->Are You Putting Any Nontraded Assets into Your IRA or Roth?
->Can I Borrow From My IRA Tax-Free?
->Why You Need Both a 401(K) And a Roth IRA
