MyRA? What is it? And is it a Good Idea or Bad Idea?

Last week in the President’s State of the Union Address you may have heard him mention a new retirement savings option called MyRA.

The idea is to provide an option for those who are not covered under an employer retirement plan to start saving for their retirement.

Basically, anyone in a household earning less than $191,000 per year and  not covered by an employer plan, can set up and contribute to their own MyRA plan. There is an initial investment of $25, and then additional ongoing contributions (as little as $5) from payroll deductions. The money is invested in a treasury bond portfolio. You receive no tax deduction up front, but it is tax-free going forward like a Roth IRA. Once your account hits $15,000, you MUST move the money to a Roth IRA.

Deposits into a MyRA are invested into Treasury Bonds which also means you are loaning the federal government money. This is your only investment option available through an MyRA.

Roth IRA’s allow you to do the exact same thing as a MyRA, but with the option of having the freedom to select almost any investment inside. Thousands of options are available.

So, is this a good idea or bad?
The real answer is neither, it's a tool that the government is offering to those who are of lower income and/or do not have access to an employer retirement plan, to start saving for long-term goals like retirement and encourages more people to start taking meaningful steps toward investments like Roth IRAs and other retirement-appropriate plans.

Chris Abts