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The myRA: A new savings plan in the toolkit for beginners

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Capital Region families have a new option to begin the critical road to retirement savings--the myRA. That stands for My Retirement Account and is a twist on the well-known IRA or Individual Retirement Account. President Barack Obama announced the new payroll deductible savings vehicle in his State of the Union Address January 28.

Americans are not saving enough for retirement. At present, only 5 per cent are on track for a proper post-work world. myRA appears to be targeted toward lower-income workers who at present do not save for retirement through a plan available at work.

The myRA is to be offered through a Roth IRA type of vehicle. Features include:

  • a starting contribution as low as $25
  • a $15,000 limit on how much can be accumulated in the myRA over a period of 30 years.
  • once the balance is greater than $15,000, it would need to be transferred to “a private sector Roth IRA.”
  • income earners as high as $191,000, however, can open a myRA.

Given that the myRA is a Roth-type plan, existing laws governing Roth IRAs are likely to apply. Thus, contributions to the plan are not tax-deductible. However, earnings from investments in the myRA will accumulate tax free and distributions from the plan will not be taxed.

The myRA has only one investment option, a mix of Treasury bonds that is identical to the government bond investment option that now exists in the Thrift Savings Plan, a retirement savings plan for federal employees.

“It’s a beginner’s plan,” says Fred Elia, president of Schenectady-based non-profit, A Thousand Moms. “It’s intended to jump start savings among a group of people who don’t have retirement plans readily available to them.”

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