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What is myRA?

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

The myRA (rhymes with IRA) is a new workplace retirement savings account discussed by President Obama in the State of the Union Address and subsequently could be authorized by executive order. The administration hopes that employers who currently don’t offer a workplace retirement plan will make myRAs available to their employees. Only very limited details are currently available.

As I understand the concept, the myRA is a regular Roth IRA with some special features. Employee contributions are made on an after-tax basis through payroll deduction. Contributions are tax-free when withdrawn, and earnings are also tax free if certain requirements are met. Contributions are invested in newly created government bonds that earn the same variable interest rate that is available through the government’s Thrift Savings Plan Government Securities fund (G Fund). The G Fund earned 2.45 percent in 2011 and 1.47 percent in 2012 (final 2013 yield not yet available). Account principal is fully protected, value can never go down and the bonds are backed by the full faith and credit of the U.S. Government.

It is anticipated myRAs will begin in 2015. They are not available now. The plan is projected to be strictly voluntary. Employers are not required to offer plan but may sign up for a pilot program by the end of this year. According to the White House, myRA accounts are available to households earning up to $191,000. Other details remain to be developed including differences between myRAs and Roth IRAs. We will keep you informed as details become available.

The development of myRAs, along with the continuing development of the Affordable Care Act requiring everyone to have major medical insurance, emphasizes the need for everyone to plan – plan for the financial risks we will have with major medical costs AND plan for the income that will be required and needed in retirement. Planning is increasingly an individual responsibility. Planning for previous generations was not as critical due to programs developed for retirees such as defined benefit pension plans. Today, the importance for individual planning is critical. Each individual must recognize and take on this planning responsibility.

With today’s life expectancy, regardless of the type of retirement plan or plans we have, the question always remains – will the retirement plan we have, or at least the retirement plan we have in our head – be adequate for our lifetime? And if the retirement plan(s) is not adequate, when will we want to know that? Is not the answer to that question, “Right now if not yesterday?” I cannot overemphasize the importance of having that answer as soon as humanly possible. Our retirement analyzer service offers the answer to that vital question. Take advantage of that retirement analyzer service.

Many planners tend to emphasize the importance of accumulating assets. Many planners today tend to focus on the accumulation of money at the time of retirement. Accumulation is important, but more important than the amount of money we have is the question on how long that accumulation of money in our plans will last. Today’s life expectancy can be age 95. The question this life expectancy generates is, “Will income from our retirement plans last to age 95?” The answer to that question is vital. Our Retirement Analyzer service answers that question for you. Our upcoming workshop provides additional details. Join us March 16 for additional details. See our ad below.