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MyRA: A New Way to Save

Employers may be offering a new, optional, retirement savings account to their employees by the end of 2014, compliments of the President’s executive authority, as announced in his State of the Union. MyRAs are considered a “starter” savings account aimed at the over 50% of employees whose employers don’t offer 401(k) plans, as well as make it easier for low and middle-income people to participate. Similar to Roth IRAs, employees can contribute using after-tax dollars; distributions will be tax-free, with the additional caveat that the principal will be guaranteed like U.S. savings bonds. A contribution of $25 can get you started, with payroll deductions a small as $5.

MyRAs will be made available to dual income households earning up to $191,000 a year ($129,000 a year for individuals), and a maximum of $15,000 in contributions will be allowed. Accounts will earn interest at the same variable interest rate that applies to the Thrift Savings Plan Government Securities Investment Fund that exists for federal employees and will last up to 30 years. After which, the accounts can  roll  into a private-sector retirement account, such as a Roth IRA  Those who invest will be able to withdraw amounts anytime, tax free. This, however, may be limited to cases of an emergency. For additional information on the parameters, visit the links below.