Popular employer sponsored retirement arrangements allow an employee to redirect up to $17,500 of annual earnings into these qualified plans. Additionally, employers have an option to make matching contributions using it to boost employee retention and moral. However, according to a Fact Sheet released this week by the Treasury Department, approximately half of all workers and 75% of part-time workers lack access to employer-sponsored retirement plans. As a result, the Administration recently issued an executive action which directed the Treasury Department to create a new retirement savings vehicle called “myRA.” The myRA, which will be available through employers, is intended to fill the employer sponsored retirement account gap.
The myRA has a number of attractive features:
- The accounts are backed by the U.S. government similar to savings bonds. So there is a 100% Principal protection.
- There are no fees wrapped into the account
- Contributions to a myRA can be withdrawn tax-free at any time.
- Participating employees can keep the same account when they change jobs and also have the option of rolling over the balance into a private-sector retirement at any time.
- Participants can start an account with an initial investment as low as $25, and contributions as low as $5 can be made through automatic payroll deductions.
- A myRA account will earn interest at the same variable interest rate that federal employees receive through the Thrift Savings Plan (TSP) Government Securities Investment Fund.
- Households earning up to $191,000 per year will be eligible to have a myRA account.
While this is a modest program in terms of tax dollars and focused mostly on middle and lower income taxpayers, it does provide another savings vehicle that should help in building wealth.