DEFINITION of 'myRA'

Editor's note: On July 28, 2017, the U.S. Treasury Department announced it would shut down the myRA program. The article below reflects the characteristics and history of the program. 

A tax-advantaged retirement account introduced by President Barack Obama in January 2014 – and launched by the Treasury Department in 2015 – as a way for lower-income workers to save for retirement. It cost nothing to open an account and workers could contribute as little as $5 per month. The maximum balance for a myRA (short for my Retirement Account) was $15,000. On July 28, 2017 the program was shut down by the Treasury Department, because the demand for the accounts could not justify the cost.

BREAKING DOWN 'myRA'

The my​RA program was started because many employers do not offer retirement plans and because most traditional and Roth IRAs have account-opening minimums and minimum additional deposit requirements that lower-income workers often can’t meet, President Obama introduced myRA to give workers who weren’t served by the existing retirement savings plans an easier way to start saving.

A myRA account was similar to a Roth IRA in that workers made contributions with post-tax dollars, but contributions grew tax-free and distributions were not taxable. Once the myRA’s balance exceeded $15,000, the worker must roll it over to a private-sector Roth IRA. By the time the account had reached that size, it will have already met the account-opening minimum for a Roth IRA.

People could set up automatic contributions from their paychecks – or from their checking or savings accounts. At tax time, they could also direct all or part of their federal tax refunds to their myRA accounts.There was no cost to employers. They would share myRA information and set up payroll deductions for employees who sign up, or tell them about other ways they can fund their myRA accounts. Contributions were invested in Treasury bonds, which are considered safe but have historically low returns that don’t always exceed inflation rates. However, the government guaranteed the principal in these investments, so workers should never lose their invested principal. The accounts had no fees.

Current holders of my​RA accounts can roll funds over to a Roth IRA

 

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