The basics. Essentially, it’s similar to a Roth IRA. Just like any other IRA, you can contribute up to $5,500 a year and you can only participate if your annual income is less than $191,000. In addition, the minimum opening balance for the account is $25 and contributions are made after taxes. You can also withdraw these contributions, tax-free, at any time with no penalty as long as you’re 59 ½ or older.
The difference. Even though there are many similarities, a MyRA is not the same as a Roth IRA. The biggest difference is the type of investment options in your account. A MyRA only offers one investment, the G fund, versus a Roth IRA, which offers thousands of mutual funds, ETF’s, and individual stocks.
The G fund. The G fund is a type of savings account (as opposed to a mutual fund). It pays a higher rate of interest than a typical consumer savings account, the balance never goes down and your money is covered by an FDIC-like guarantee.
The audience. MyRA certainly isn’t for everyone and is targeted mostly toward people who have no retirement savings.The maximum amount you can have on deposit in a MyRA account is $15,000. After that, you must transfer the funds over to a Roth IRA. The account will be available later this year and employers will start encouraging employees to participate and begin making contributions. This type of account is especially great for those who don’t have a retirement plan at work and are only able to contribute a little bit at a time.
Get it now. MyRA isn’t available yet but if you think you would be a great candidate, there are a few other options that are similar. First, you can sign up for TreasuryDirect and buy Series 1 US Savings Bonds. You can purchase these in small increments, but unlike the MyRA, these are not tax-free and there is a small penalty for withdrawing in less than five years. You can also open a Roth IRA at your bank or credit union. If you already have a savings account, most banks will allow you to convert that account into an IRA.
Why you need it. MyRA is a great way to kick off your savings career. It’s an easy way to slide into your savings routine and take the training wheels off.
Saving for retirement is no easy task, especially if you are not starting at an early age or starting over after several poor financial decisions that may have affected your credit or savings ability. The first step toward financial success is repairing your credit so that you have several options when it comes to your financial future.
If your credit is suffering, you might also consider credit repair options. Let us at Ovation help you. We offer a wide range of credit repair solutions, customized to meet your unique needs.
Contact us today to see how we can help.