Popular employer sponsored retirement arrangements allow an employee to redirect up to $17,500 of annual earnings into these qualified plans. Additionally, employers have an option to make matching contributions using it to boost employee retention and moral. However, according to a Fact Sheet released this week by the Treasury Department, approximately half of all workers and 75% of part-time workers lack access to employer-sponsored retirement plans. As a result, the Administration recently issued an executive action which directed the Treasury Department to create a new retirement savings vehicle called “myRA.” The myRA, which will be available through employers, is intended to fill the employer sponsored retirement account gap.

The myRA has a number of attractive features:

  1. The accounts are backed by the U.S. government similar to savings bonds. So there is a 100% Principal protection.
  2. There are no fees wrapped into the account
  3. Contributions to a myRA can be withdrawn tax-free at any time.
  4. Participating employees can keep the same account when they change jobs and also have the option of rolling over the balance into a private-sector retirement at any time.
  5. Participants can start an account with an initial investment as low as $25, and contributions as low as $5 can be made through automatic payroll deductions.
  6. A myRA account will earn interest at the same variable interest rate that federal employees receive through the Thrift Savings Plan (TSP) Government Securities Investment Fund.
  7. Households earning up to $191,000 per year will be eligible to have a myRA account.

While this is a modest program in terms of tax dollars and focused mostly on middle and lower income taxpayers, it does provide another savings vehicle that should help in building wealth.

Farshadyashar Thumb

Farshad Yashar

Farshad Yashar, CPA, CFA, has over 30 years of experience with two major accounting firms. He has extensive experience in taxation of corporations, flow-through entities, financial products and real estate. His experience includes advising buy and sell-side clients with respect to tax aspects of…Learn More