myRA – a safe startup retirement account

Running Your Money column logoBy Harry Stoll

“myRA” is a retirement account established by the U.S. Treasury in January 2015; it’s for workers without an employer-sponsored retirement account. (If you have any other retirement plan, such as 401k or another Roth IRA, it doesn’t matter.) myRA is a form of a  Roth IRA, but with one important distinction: It is not stock market based as other IRA’s are, but on U.S. Treasury bonds. So it won’t grow dramatically, but you cannot lose money. The Treasury bonds backing it averaged 2.9% for the 10 years ending December 31, 2015.

You can open a myRA with as little as $25 and make contributions as low as $5 (provided your income is less that $131,000 or 193,000 for married couples filing jointly). You can arrange for you employer to make regular contributions, have regular contributions from a checking account or make periodic contributions from a checking account. The amount you can contribute in a year is $5,500, or $6,500 for those over 50.

The money you put in has been taxed so there’s no tax on it when withdrawn. The dividends are also tax free when taken out, which is a huge plus. There are hoops to jump through when withdrawing. In general you can withdraw after age 59 and ½ without being taxed or paying a penalty.

An important point: when the balance reaches $15,000 or you have it for 30 years, whichever is first, it must be transferred to regular Roth account. And before that amount is reached funds in the myRA can be transferred to another Roth IRA. Here’s a method to then get cash from the Roth IRA to which you transferred funds: I have a self-managed Roth in which I select the investments. I could transfer funds to from myRA to the regular Roth where it goes into an “available for investment” category. I could then have the broker send me a check.

This is an ideal retirement investment for those entering the labor market, whether it’s flipping burgers, bagging groceries, steaming lattes, or being a corporate lawyer. You can make contributions when you are able. It might be a strain sometimes, but it’s a start. End of lecture

MyRA can also be used by anybody as a safe place to stash some money and get some interest.

The U.S. Treasury has arranged for Comerica Bank to be the custodian for myRA’s. It accepts contributions from checking accounts. But you can’t delete an account once established. The web site states you can have up to five external accounts, but customer service said it’s up to three. Not a deal breaker, but annoying. And because your contributions temporarily go into a Comerica Bank account they can share certain of your information. No charge appears against the account; obviously the U.S. Treasury is paying Comerica a fee. I had no luck in getting Comerica to tell me the fee. I’ll try the Treasury and report back.

To get started: myra.gov

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