Sunday, March 2, 2014
Introduced in President Obama’s State of the Union address, the MyRA is designed for someone with little to no savings who wants to do something simple. But are investors better off not using the savings tool at all?
First, the basics. Anyone making less than $129,000 a year can contribute ($191,000 for couples). It costs $25 to open an account and a $5 minimum contribution per paycheck. The money can be rolled into a Roth IRA after 30 years or when the balance reaches $15,000. The money is invested in the Government Securities Investment Fund (G Fund).
The President touted that money can never be lost in the MyRA. This is because consumers are forced to invest in the G Fund. The 2012 rates of return for the G Fund are 1.47% (1-year), 2.24% (3-year), 2.69% (5-year), and 3.61% (10-year). With these modest rates of return, are investors better off taking their money home, paying taxes on it, and investing it in places expected to generate significantly higher returns?
See Roccy DeFrancesco, Why Obama’s MyRA Is Useless, Asset Protection Society.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.