President Obama offered details on a new retirement savings account, the “myRA”. Here’s what you need to know (via WSJ.com):
- The accounts would be aimed at workers whose employers do not offer traditional retirement accounts like 401(k)s.
- The accounts would function like a Roth IRA and have government backing like a savings bond. This would give the investments principal protection, meaning the account balance cannot go down.
- There will be an initial pilot program for companies that agree to enroll by the end of this year. Workers can invest if they make less than $191,000 a year.
- Businesses will not administer or run the accounts. They will simply offer them to their employees if they decide to participate.
- There will not be a tax penalty if the investments are withdrawn.
- Initial investments could begin at $25, and subsequent investments could be as low as $5. The idea is to have investments added through payroll deductions.
- Accounts can be taken by the employee from one job to the next, and they can be rolled into an Individual Retirement Account at any time.
- The accounts would have the same variable interest rate return as the Thrift Savings Plan Government Securities Investment Fund accounts that federal employees enroll in.
- Once someone’s account grows to $15,000, the myRA must be rolled over into a private-sector Roth IRA.