Workers will soon have a new retirement savings option. In his State of the Union address, President Obama announced the establishment of the new MyRA program, which creates retirement accounts for workers who do not have access to employer-sponsored 401(k)s.
MyRAs can be opened through employers with as little as a $25 minimum deposit and with future contributions as low as $5, automatically deducted from employees’ paychecks. The money is invested in a government bond fund, rather than in stocks, as many 401(k)s are. The principal cannot be lost, but returns will be relatively small. The accounts are portable, meaning that the employee can keep the account when switching jobs.
The plan is open to households making $191,000 or less annually, and the accounts have no fees, which should make them accessible to low-wage workers. There are no penalties for withdrawing funds at any time, and withdrawals are not considered taxable income. When a MyRA reaches $15,000, it is rolled over into a Roth IRA, so the accounts can provide a starting point for more substantial savings.