The Latest in Retirement Planning Options: Meet myRA
myRA is a program designed to help people with few retirement planning options save for the future.
Earlier this month, the Treasury Department launched a new retirement savings program nationwide called myRA, an introductory plan for people whose workplaces do not offer retirement plans. For anyone already contributing to a 401(k) or with significant savings already set aside, this is probably an afterthought—most of these folks won’t qualify. But for those just starting out, or those trying to get into the habit of setting funds aside, it can be a springboard to long-term retirement planning.
MORE: Do you know how much your retirement will cost? Do you know how to generate the retirement income you’ll need? The Definitive Guide to Retirement Income will help you find answers to these and other important questions.
Retirement Planning with myRA
A myRA alone won’t be anyone’s ticket to a comfortable retirement. It maxes out once participants reach $15,000, and return options are limited to one low-yielding government fund. Once accounts graduate, participants are meant to roll them into a Roth IRA, where they can continue saving after-tax income and growing their principal tax-free with a much, much broader universe of options, such as stocks.
The Benefits of myRA
So why are myRAs useful for those in the early stages of retirement planning?
- Contributing regularly can help folks—particularly young folks—get in the habit of saving early and often. If you start when you’re young and keep it up your entire career, you can have a nice nest egg when it’s time to retire, especially if you invest wisely.
The logistics are very simple, removing many folks’ operational objections to saving. With myRA, you can deduct contributions directly from each paycheck, the retirement fund carries no fees, and there is no minimum investment.
- Even though the plan’s interest rate is very low (it’s based on the weighted-average yield of all outstanding US Treasuries with maturities beyond four years and has a zero percent return floor), it will still introduce people to the magic of compound growth. Watching even a small savings pool compound at a low rate year after year can open people’s eyes to the potential of compounding their savings at higher rates once they graduate from the myRA.
So no, myRA alone isn’t a one way ticket to happy golden years. But at Fisher Investments, we’re all for something that helps teach and develop good financial habits as well as introduce the concept of retirement planning strategies to underserved individuals. While myRA may not be the greatest savings vehicle in history, as an educational tool, it should have great value.
If you’re interested in learning more, here are some of our favorite pieces that further explain the myRA program: