Are you just starting out in your working career? Are you a lower income earner? Do you not have access to a 401(k) plan at your place of employment? If the answer to any of these questions is yes, there is a way to save that may be to your benefit. In the last year or so the government has started the myRA program. The myRA is the ultimate savings vehicle for those who have limited funds to invest or those who are safety first when it does come to investing. Run by the Federal government the myRA is similar to the Thrift Savings Plan (TSP) G Fund, which invests in special issue Treasury notes.
While the TSP is only for Federal employees and has numerous investing options, the myRA is treated much in the same regards. The myRA is designed to be used for people who have difficulty in saving or do not have what some consider investment size funds to be investing. Well, the myRA can be opened with as little as $25, and subsequent investments can be as low as $2. While these amounts will not secure you a comfortable retirement, it is an excellent starting place for many younger workers or those who are in low paying positions. Then the investments are in the same securities as the TSP’s G Funds, which has, a guarantee on the principal invested and historically has just outpaced inflation in the return on the fund.
The myRA is set up similar to a ROTH IRA in the fact it is taxed prior to the investment being made. That also means that the principal may be withdrawn without penalty in the event you need some liquid cash source. Which is perfect for the investor that the myRA is targeted towards. And with the G Fund being extremely safe it also allows people to sleep soundly knowing their money is protected. But with the security of the G Fund you will not get the types of returns that allow for rapid growth in your retirement accounts. On average the fund returns between 1% and 4% a year just a little higher than that year’s current inflation figure.
But the myRA is not set up for extremely long term investing as once the account reaches $15,000 the participant must roll the funds over into an external IRA account. This IRA may be a Traditional or ROTH IRA, but it does force the participant to seek investments outside the safety of the guaranteed myRA. If you are a participant of the myRA, I strongly suggest you roll the funds over into a ROTH IRA so the earnings will be tax-free at age 59 ½. Which is the age you are able to withdrawal funds from a myRA account if you are leaving the funds in that until you retire.
While the myRA is not perfect, it does provide an excellent platform for young and low-income individuals to invest and save for their retirement. However, if you have small amounts and wish to invest in an IRA, I can suggest www.sharebuilder.com as an option as they have no fees for IRA’s, no maintenance fee and low commissions on trades. In addition, with an account there you can invest in more aggressive investments that are geared towards higher returns than the myRA.
If you need any additional information or have any questions, please feel free to contact me.
