Try this tool to start saving now
Do you have a child or partner who does not yet have a retirement savings plan? Accumulating enough in a savings account in order to even open a mutual fund account can be a long process, especially with current low interest rates. The myRA was created as a vehicle to help people build a pool of dollars to invest in other types of retirement funds later.
myRA is a retirement savings account developed by the U.S. Department of the Treasury that helps make saving easy. myRA could be a good option for your family member if they don’t have access to a retirement savings plan at work, yet want to start saving for their future. It costs nothing to open, there are no fees, and they choose how much they want to save – whatever fits their budget.* myRA is simple, safe, and affordable.
myRA is essentially a Roth IRA, funded with after-tax dollars. Contributions are invested in a new U.S. Treasury Savings bond that earns interest at the same rate as investments in Government Securities Funds available to federal employees. These investments earned 2.31% in 2014 and an average annual return of 3.19% over the ten-year period ending December 2014.
The myRA saver can save up to $15,000 in this fund before transferring it to a private sector Roth IRA.
- It is simple to set up automatic contributions into a myRA. This can be done on-line. If a person changes jobs, the account stays with the saver- – it’s portable. Contributions can be made from a saver’s paycheck, their checking or savings account, or from their federal tax refund. The money that is invested must be from earned income.
- The money is safe because it is backed by the US Treasury. The account safely earns interest. There is no minimum account balance and no minimum amount required to get started in a myRA.
- The myRA is affordable because there is no cost to open the account, and there are no fees. Savers contribute an amount they choose every payday – – whatever fits their budget, even if it’s just $5, $25, or $100. They can contribute up to $5,500 per year (or $6,500 per year if age 50 and over). Savers enjoy the tax advantages this type of investment brings.
myRA can fit into the bigger picture of financial security for a person. If you have family members or friends, tell them about the myRA as a way to get started on their retirement planning. The myRA.gov website is easy to use and understand.
*Annual and lifetime contribution limits and annual earned income limits apply, as do conditions for tax-free withdrawal of interest. To learn about key features of a Roth IRA and for other requirements and details, see myRA.gov .
Thank you for the information Laurel. This can assist many people in getting started on a Retirement plan.
Thanks for the information Laurel. Does it make sense for a college student, who is working while going to school to set up a retirement account? Or should they wait until they finish school and pay off any loans before they set up an account? On one hand, the interest they earn might be less than the interest they are being charged. On the other hand, setting up a retirement account is a habit/discipline that could be started with a very small amount. What are your thoughts?
Sheila,
You pose an important question and factors that need to be included when considering action. I think that if a student is working while attending college, they might contribute at least some modest amount to a retirement account during those years so they would be taking advantage of the time value of money. And, they would be establishing a habit that will work to their advantage over the long term. A modest amount could be just $25 per month, whatever fits into their spending and savings plan. Because paying off loans may take many years, a person shouldn’t wait to start saving, even though the current interest rate is low.