In his State of the Union Address on January 28th, 2014, Barack Obama introduced America to a new way to save for retirement: myRA, short for My Retirement Account. A direct quote from his State of the Union:
” Let’s do more to help Americans save for retirement. Today, most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k) s. That’s why … I will direct the Treasury to create a new way for working Americans to start their own retirement savings: myRA.”
— President Barack Obama, State of the Union, January 28, 2014
As with any form of investing, it is important to understand the aspects and features of the funds you are putting your money into. I hope to provide you with a little more information about myRA in this post. It’s no secret that saving for retirement is essential for every American.
What is myRA?
My Retirement Account was created for Americans who do not have an employer sponsored retirement program. As you may or may not know, many firms, companies, and organizations have a 401(k) or 403(b) program set up for their employees where the employee can put a portion of their paycheck into the account to save for retirement. Some companies will even match a portion of what the employee puts in. However, many Americans, especially those working low income jobs, still do not have accesses to these retirement savings accounts or simply cannot afford to contribute. myRA has been put in place to close this gap. myRA is set up just like other retirement savings plans. An employee can elect to have a portion of their paycheck deposited into the account every month. It’s a simple way to get a head start on saving for retirement.
What are the Benefits of myRA?
• Saving Money for the Future
This one is a no brainer. Any opportunity that an employee has to save money should be taken. myRA was created in the hope that Americans who are currently not saving money for their retirement will begin to do so. As we are beginning to see, a social security check is not going to be enough to get the average American through retirement.
• It’s Easy to Understand
The myRA was created to be easy for working Americans to understand. An employee can make contributions as low as $5 every month. The account can be moved when you switch jobs, and it can be moved into different retirement accounts such as an IRA whenever you would like. It offers an easy and flexible way to get started on saving for retirement.
• It Offers Safe Investments
The money that you put into your myRA account are invested in treasury securities. Treasury securities are backed by the full faith and credit of the United States, meaning that these investments are very safe. The only pitfall to this is that treasury securities do not offer much of a return, so owners of myRA accounts will not see as much growth in their savings as they would with other more risky retirement accounts. However, the myRA is a great way to get started saving for retirement especially for low income Americans.
• Anybody Can Afford It
The myRA account can be started with an initial investment of $25. From there, Americans can make deposits as little as $5 straight from their paychecks into the account.
How Can I Enroll in the myRA Program?
Details are still forthcoming. Right now the Treasury Department is still working out a few different aspects of the program. By the end of 2014 Americans should expect to be able to enroll in the program online.
A Few Other Details
There are a few rules put into place for the myRA account that Americans should be aware of. The myRA was created for low income Americans. However, a person earning wages up to $191,000 will be able to enroll in the program. The myRA account is allowed to accumulate a maximum of $15,000 over 30 years. Once either one of these limits are met the owner of the account will have to put the money into a more traditional retirement savings account.
Powercat Financial Counseling is here to help!
Retirement can be a daunting thought for many people, especially when you are young. It is never too early to start saving though! Here at Powercat Financial Counseling we strive to help students at K-State use their money wisely. If you have any questions about the myRA account, or saving for retirement in general please feel free to sign up for a counseling session. We would love to meet with you.
Peer Counselor I
Powercat Financial Counseling