How myRA, new retirement account, works

How myRA, new retirement account, works

A government-backed individual retirement account announced nearly two years ago by President Obama is now available across the country, the Treasury Department said Wednesday, and it removes several barriers that keep millions of people from saving for their retirement.

The account, called a myRA, has no fees, no minimum balance, no risk of losing money and it doesn’t have to be linked to an employer.

“It’s a great way to start saving for retirement in a low-risk way,” said Ed Gjertsen II, president of the Financial Planning Association.

MyRAs are designed for those people without access to employer-sponsored retirement plans like 401(k)s, but anyone under certain income levels is eligible.

Workers can have contributions deducted automatically from their paychecks for deposit into their accounts, and employers are not charged any administrative fees to do so.

Experts say regular, automatic contributions are a crucial way for people to build nest eggs.

Here are more details about the account and how it works:

How much money do I need to open an account?

Money can be deposited from a checking or savings account or directly from your paycheck.

If you want money to come out of your paycheck and your employer allows direct deposits, myRA provides a form to give to your employer at https://myra.gov/files/myra-direct-deposit-form.pdf.

There are no fees or taxes to pay on the money you have deposited, but if you are younger than 59½, you will have to pay taxes on the interest that your money has earned.

Once the account grows to $15,000, you must move your money to a private-sector retirement account like a Roth IRA.

MyRA invests in a fund made up mostly of U.S. government bonds called the Government Securities Fund, and it will not lose money.

Many of the rules are the same, but Roth IRAs through banks or brokerage companies generally have fees or require minimum contributions that can be too high for some.

Another major difference is that with Roth IRAs you can invest in stocks, bonds, mutual funds or other investments.

With myRA, the government hopes it can push more people to start saving for retirement and eventually lead them to opening Roth IRAs.

The government and financial planners caution that this is a way to get people to start saving for their retirements.