Friday, January 31, 2014
Following President Obama’s announcement of “myRA” in his State of the Union address, the White House has released details of the new retirement savings account, which is aimed at the 50% of employees who have no access to employer 401(k) plans.
These “starter” savings accounts will be offered by employers through Roth-like IRA accounts with a guaranteed principal (like U.S. savings bonds). According to the press release, individuals can withdraw tax-free amounts any time, but the Presidential Memorandum to the Secretary of the Treasury suggests withdrawals be made available only in emergencies.
MyRAs will require an initial investment of at least $25 and payroll deductions as low as $5. The accounts will earn the same interest as the Thrift Savings Plan Government Securities Investment Fund. Employees changing jobs can keep their myRAs or roll them over into a private sector retirement account. After reaching 30 years or the total contribution limit of $15,000, participants will roll their accounts into a private-sector retirement account. MyRA accounts should be available by December 31, 2014.
President Obama also plans on helping employees without access to a workplace savings plan by establishing ‘auto-IRAs,’ which are IRAs funded through payroll deductions. This proposal would require enactment by Congress.
See Sally P. Schreiber J.D., Details of new myRA Retirement Savings Vehicle Revealed, Journal of Accountancy, Jan. 30, 2014.