There are several caveats that we know now about myRA: initial investment would begin as low as $25. The idea is to have the investments done through a payroll deduction. It is not clear if this would require extra work for the small business owner. A representative of the National Small Business Association, an advocacy group for small business, suggested that her organization supports making retirement accounts easier, but warns that the responsibility for administration of the accounts could fall squarely on the shoulders of the small business owner.
On the surface, it appears that the myRA accounts would function similar to the Roth IRA, with differences. With the myRA, married couples with modified adjusted gross income up to $191,000 and individuals up to $129,000 will be able to save up to a total of $15,000 in after tax money for a maximum of thirty years. Contrast this with the typical Roth IRA which generally (with some exceptions) allows employees to save up to $5,500 per year, or $6,500 if over 50 years of age (in 2014.) There are no fees for the myRA accounts. When employees with myRA savings accounts reach $15,000 (or after thirty years) the savers can then roll over the account to a private sector Roth IRA. It has been noted that the accounts will be portable - the saver can take their myRA from one job to another. (Assuming the company offers myRA savings accounts?)
If the myRA accounts are pegged to the federal employees Thrift Savings Plan Government Securities Investment Fund, that fund model had an average rate of return of 2.69% over the past five years (ending Dec. 2012.)
Will this program survive? At this time it is in preliminary "test" phase. The myRA accounts will likely be voluntary and businesses will not be required to offer them. It is a step towards encouraging Americans to save more toward retirement. According to independent research firm Next Advisor, 25% of Americans reported (in 2012) having no savings at all and 40% reported that they are not saving for retirement.
Stay tuned for more updates about myRA.
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