You want to save money towards your retirement, but your employer does not offer a retirement plan, such as a 401(k). You are not alone, as it is estimated that half of all employees and 75% of part-time workers do not have access to an employer retirement plan. But now there is good news for you! There is a new type of retirement account in town, and it’s called myRA.
The letters stand for “my Retirement Account,” and your contributions to myRA plans are made via payroll deductions through your employer. Unlike most job-related retirement plans, a myRA is portable, which means it is not tied to a single employer. In other words, if you change jobs the account stays with you.
There is even more good news for you, as your investment in a myRA can potentially be tax-free! myRAs share many features with existing Roth IRAs (as a matter of fact, the myRA is actually a type of Roth IRA). Whatever you make on your investment is not taxed later, as long as when you take the distribution you are at least age 59½, disabled, or a first-time homebuyer, and the 5-year holding period is met. You can even withdraw the money you put into your account at any time without paying taxes or penalties.
At this point, you might be worried about losing money in the stock market or any other type of investment that could decrease in value. Well, not to worry, as your myRA account value will not go down because it is backed by the United States Treasury and earns interest at the same rate as investments in the government securities fund. In addition, you pay no fees to open the account or maintain the account. There is also no minimum contribution, so you can start for as little as two dollars a paycheck.
Now you might be thinking, “What’s the catch?” There has to be a “catch,” right? Well, not everyone qualifies to contribute to a myRA. For 2015, your income cannot exceed $131,000 per year (or $193,000 if you are married filing jointly). Also, you must be paid as an employee (i.e., you receive a W-2 each year), as currently a myRA is not available if you are self-employed. Also, your contribution cannot exceed your wages earned, or $5,500 ($6,500 for age 50 or older), whichever is less. Your contribution will also count towards any Roth IRA contributions you may have made in determining your maximum Roth IRA contributions for the year. Lastly, your myRA account balance cannot exceed $15,000 or be open for more than 30 years. Once either of these limits are reached, you can roll it over tax-free to a private-sector Roth IRA.
If you are interested in starting a myRA, check with your employer to see if you can contribute to your myRA account via-payroll deductions.