Closely Held Business Advisor: myRA Info

October 4, 2016

You are much more likely to be offered retirement benefits if you work for a large company rather than a smaller one. Small employers often don’t want to deal with the paperwork, administration costs and fiduciary responsibility that come with sponsoring a retirement plan. These are some of the reasons the United States Treasury announced a retirement savings program geared towards individuals who are not offered a retirement savings option through their employers. If this is something you think your employees may be interested in, please let them know this could be an option for them.

The myRA account is a new, simple, safe and affordable way to open a starter retirement account. It is targeted at the millions of low and middle income Americans, such as part time workers or those at small businesses, who don’t have access to a retirement savings plan through their job or lack other options for saving. But any workers may invest in the accounts. This is a unique savings vehicle because the principle is guaranteed by the U. S. government, so the account balance will never go down. The myRA offers people a sense of security and the incentive to begin putting money away for retirement in a straightforward way.

myRA: How it Works

myRA Background Information

  • myRA is a government-sponsored Roth IRA.
  • The IRA is invested solely in U.S. Treasury Bonds so it earns interest at the same rate as an investment in a government securities fund.
  • The program is intended primarily for individuals or households whose occupations do not provide any sort of retirement fund.
  • There are no costs to opening a myRA and there are no fees.
  • An individual may only have one myRA in their lifetime.
  • For more information, visit https://myra.gov/

Eligibility Requirements

  • The individual who intends to open a myRA account must either have earned income in the U.S. or be listed on a joint return in which the spouse has some amount of earned income.
    • A non-earning spouse is allowed to open and save in a myRA account if a joint return is filed each year for each year a contribution is made.
  • For 2016, there is an annual earned income limitation of $132,000 for single, head of household or married filing separately taxpayers. This limitation is increased to $194,000 if married filing jointly.
  • You are allowed to open a myRA if you also participate in an employer sponsored retirement plan.

Contributions

  • There is no minimum contribution requirement for a myRA.
  • There is a maximum contribution of $5,500 per year or $6,500 per year if the individual is above the age of 50. (This amount can be distributed across multiple IRAs but no individual can exceed this maximum contribution limit).

Withdrawals

  • Just like a Roth IRA, the money that has been saved in the account can be withdrawn at any time without penalty.
  • The interest earned on the money saved can be withdrawn without penalty if these requirements are met:
    • The date of withdrawal is at least five years after January 1 of the year of the first contribution.
    • The individual is at least 59 ½ years of age or meets certain conditions, such as:
      • The individual is disabled.
      • The money is being withdrawn for a first time home purchase ($10,000 limit).
      • The money is being withdrawn by a beneficiary after the owner’s death or disability.

Maturity of myRA

  • myRA savings are invested in a single retirement savings bond issued by the U.S. Department of the Treasury. The bond has a maturity date based on the value ($15,000) and age (30 years) of the account. This means that when your myRA reaches $15,000 or 30 years from your first contribution, whichever comes first, the account will stop earning interest.
    • When this occurs, the individual will be notified so that they can transfer or roll over the balance of their myRA into a private-sector Roth IRA, where they can continue to earn interest.
    • If the holder of the account does not take action the money will be automatically transferred into a private-sector Roth IRA based on instructions previously provided by the individual.
      • The money in the myRA can be rolled into a private-sector Roth IRA at any time without penalty if the holder of the account wishes to do so.