personal finances — March 28, 2016

MyRA - Help for New Savers

by Bob Williams

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MyRA – a new kind of IRA

You already know that we here at 1040.com are all for making taxes simple. Well, a new program by the U.S. Treasury Department fits into that nicely – while helping a whole class of American taxpayers.

Allow us to explain.

Historically, one of the biggest economic challenges facing the U. S. has been how to inspire new taxpayers to actually save part of their income every year. A taxpayer who is also a saver strengthens the economy. In fact, a 2014 report from Oxford Economics said an increase in personal savings can make the U.S. less dependent on foreign capital, make households more secure, and strengthen long-term economic growth.

A new program called myRA (think MY-R-A) from the Treasury Department can help do that, while also offering the taxpayer more than a few incentives to save.

If you don’t have a retirement savings account at work and you’re looking for an easy way to start saving, myRA might be a good fit.

It’s Simple: You can contribute how much you want to save – whatever fits your budget (as little as a few dollars, up to $5,5000 per year.)

It’s Safe: MyRA has no risk of losing money and is backed by the U.S. Treasury.

It’s Affordable: The account costs nothing to open; there are no fees and no minimum contributions.

Here’s how it works: MyRA is a Roth IRA that safely earns interest at the same variable rate as investments in the Government Securities Fund for federal employees.  Savers can withdraw the money they put in without tax and penalty. Interest earned can also be withdrawn without tax and penalty under certain conditions. Your account balance can be rolled over or transferred into a private-sector Roth IRA at any time.

And you can direct all or part of your income tax refund directly into your myRA account.

MyRA accounts can have a maximum balance of $15,000 or less for up to 30 years. Once either cap is reached, the money is transferred to a private-sector Roth IRA.

We’re hitting the high points here, of course, and you may want to look a little deeper into whether this opportunity to save for retirement may be a good choice for you. Check out the myRA.gov website, or call (855) 406-6972 for more information.

 

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