Client Alerts Obama Administration Launches myRA Retirement Savings Program

Publication
11.05.15 | By: Dan Newman

Saving at an early stage is critical towards accumulating enough wealth for retirement. In an effort to emphasize putting funds away for the future, the Obama Administration has rolled out a new retirement savings vehicle today called myRA. Orchestrated by the U.S. Department of Treasury, myRA is tagged as a simple, safe and affordable way […]

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Saving at an early stage is critical towards accumulating enough wealth for retirement. In an effort to emphasize putting funds away for the future, the Obama Administration has rolled out a new retirement savings vehicle today called myRA. Orchestrated by the U.S. Department of Treasury, myRA is tagged as a simple, safe and affordable way for certain individuals to save for retirement.

The new tool is designed for workers who do not have access to employer-sponsored retirement savings plans — usually 401(k)s — or lack other options to save. The myRA is a Roth retirement savings account that requires no minimum balance and has no start-up costs or ongoing fees. The account is available for individuals with taxable compensation and income below $131,000 and couples with incomes under $193,000. There are no minimum contributions requirements so individuals can contribute an amount that best fits their budget.

People can fund their myRA accounts through multiple sources, whether it be from a paycheck, personal bank accounts or from their federal income tax refund. All contributions will be invested in a new U.S. Treasury security, which safely earns a low level of interest. Because the investment is backed by the U.S. Government, the account carries no risk of losing money.

The myRA is a Roth savings account, so all rules and tax advantages of these types of accounts are in full force. Deposits are not tax-deductible, but instead grow tax-deferred and come out tax-free on retirement. Individuals can withdraw contributions at any time without paying tax and penalty. If a distribution is qualified, the earnings in the account upon the distribution are not taxable. On a yearly basis, maximum contribution and income threshold limits are dictated by Roth IRA limits.

MyRA is only the first step to saving for retirement. As such, once the account reaches $15,000 or has been in existence for 30 years, the account must be transferred to a private-sector Roth IRA. The myRA is meant to address a need, but not replace other possible avenues of retirement income sources.

For more information, contact Dan Newman at dnewman@orba.com or call him at 312.670.7444 for assistance.

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