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Quick Summary

  • myRA was a government-run retirement plan ended in 2017 by the administration of President Donald Trump. It had helped people save for retirement with an account that had no fees, no minimum balance and no risk of losing money.
  • There was only one investment choice in a myRA: a U.S. Treasury-backed security
  • myRAs were meant to be a kind of “starter” Roth IRA. When the account grew to $15,000, account holders had to move it to an IRA plan held at a private sector bank or brokerage firm.

Introduction

Here’s how it worked: myRA was a new kind of retirement plan designed to help people who aren’t covered by retirement plans at work and haven’t saved much for retirement. The accounts had no fees and no minimum balances. The program began in 2014.

There were two important differences between a myRA and other kinds of retirement plans—for example, Roth IRAs, Traditional IRAs and 401(k)s.

  • With a myRA, you invested only in a retirement savings bond backed by the U.S. Treasury. The bonds averaged 2.63 percent in earnings over the past 10 years. Account holders probably earned less over time in a myRA than they would if they had invested in stocks and bonds through another kind of retirement plan. But the accounts were guaranteed not to lose money.
  • Because a myRA was meant to be a starter retirement account, account holders were required to move the money to an account like a Roth IRA, held at a private-sector bank or brokerage such as Fidelity after 30 years or when they reached $15,000 in savings.

One of the advantages of a myRA account was that account holders could withdraw the money they deposited at any time (as you can with a Roth IRA). This meant it could also be used for short-term savings, such as an emergency fund, or for a first-home purchase. These were potentially good accounts for emergency savings because interest rates paid by banks at the time were lower than the returns savers were likely to earn in a myRA.

This article answers other questions about myRAs:

  1. Who Was Eligible to Open a myRA?
  2. What Were the Contribution Limits?
  3. How Did Savers Sign Up?
  4. What Were the Investment Choices?
  5. How Much Did They Earn?
  6. What Were the Tax Breaks on a myRA Account?
  7. What’s the Bottom Line?

Who Was Eligible to Open a myRA?

myRA accounts were designed for people who don’t have access to 401(k) plans or other employer-sponsored retirement plans. But anyone who mets the income criteria could open one. For 2017, the last year of its existence, individuals who earned less than $133,000 a year or couples who earned below $196,000 a year were eligible.

What Were the Contribution Limits?

There was no minimum amount to start an account and you could deposit funds in any amount until you reached the annual contribution limit.

myRA accounts were technically Roth IRAs, so they fell under the same rules. If you were under 50 you could deposit up to $5,500 a year. If you were 50 or older by the end of the year, you could deposit up to $6,500. Those were the total combined annual contribution limits for all the IRA accounts a tax payer might have, including any Traditional IRAs and Roth IRAs he or she might also hold. Once the account grew to $15,000, the saver must move the money to a private-sector retirement account like a Roth IRA.

How Did Savers Sign Up?

To sign up, you went to myRA.gov. You needed a Social Security number and either a driver’s license or a state or military identification number or U.S. passport. You also needed to decide your beneficiary, the person who would get the money in your account if you died.

To deposit money, you sent a check. If you wanted contributions to be deducted from your paycheck, you would give a direct deposit form to your employer. myRA did not charge fees to your employer for making direct deposits.

You could also direct that your federal tax refund be deposited in your myRA account by checking a box on your tax return.

What Were the Investment Choices?

It’s simple: There was only one. The money in your myRA account was invested in a U.S. Treasury security.The fund earned a variable interest rate of 1.82 percent in 2016, compounded daily. The return was at the same rate as investments in the Government Securities Investment Fund available to federal employees through the Thrift Savings Plan.

The upside of this investment choice was that your money was guaranteed. Unlike investments in stocks or bonds, you couldn’t lose money.

The downside is that your returns, over time, could be lower than if you had invested in stocks and bonds.

What Were the Tax Benefits of a myRA Account?

As with a Roth IRA account, investment gains and withdrawals were tax-free [this is not true of withdrawals from a Traditional IRA or 401(k), where the gains are tax-deferred until you start withdrawing them]. Most experts say Roth IRAs were good for younger savers, who were likely to be in a lower income tax bracket early in their lives and would benefit from the tax-free withdrawals later, when they were likely to be in a higher bracket.

However, unlike a Traditional IRA or 401(k), the contributions you made to your myRA account did not reduce your taxable income. As with a Roth IRA, you were contributing post-tax dollars.

One excellent exception: Depending on your income, your myRA contributions might have made you eligible for the Saver’s Tax Credit, which can be worth as much as 50% of the first $2,000 deferred by each account holder.

As with a Roth IRA, you could withdraw any of the money you contributed to a myRA at any time without paying taxes or a penalty. But if you withdrew any of the interest that money had earned, you would owe taxes on that interest. Interest or earnings withdrawn before the account owner reaches age 59½ were subject to income taxes and a 10 percent early withdrawal penalty.

What’s the Bottom Line?

If you were a beginning retirement saver, this was an easy, free to start saving and investing. You could get a better return and more flexibility elsewhere, but starting to save for retirement is one of the best decisions you can make.

At the time the government announced myRA’s shutdown, around 30,000 people had saved $34 million in the program. Those who held myRA accounts were notified in July 2017 that they would receive information about transferring their accounts to a Roth IRA. If that includes you, read about the end of the myRA account, including a list of brokers offering low fees and a low (or no) minimum balance requirement.

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