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Sunday January 25, 2015

Washington News

Washington Hotline

Will myRA Boost Retirement Saving?

In the State of the Union Address this week, President Obama proposed a new retirement plan called "myRA." It is designed to help increase retirement savings for Americans who do not have a workplace retirement plan.

The White House fact sheet describes "myRA" as a "simple, safe and affordable starter plan." The fact sheet describes four basic features of myRA plans.

1. Safe and Secure – Plan contributions will be invested in government securities similar to a savings bond. The investment plan is patterned after the Government Securities Investment Fund, a part of federal employees' Thrift Savings Plan. The government plan paid 1.4% in 2012. Previously, it had paid over 3%. The myRA investments are designed to produce a very secure but modest return.

2. Contributions – Participants may make very modest contributions, with amounts as low as $5 or $25. The contributions will be after-tax amounts in a manner similar to the Roth IRA. However, the primary group that will be interested in myRA is likely to be low or moderate income workers who pay little or no federal income tax. The myRA will not be available for upper-income workers, and the limits will be the same as the Roth IRA.

3. Fund Limits – When the myRA reaches a fund balance of $15,000, the individual will be required to move to a Roth IRA. Many financial service organizations provide comparable service and multiple investment options to an individual with that fund balance.

4. Goal – The primary purpose of the myRA is to encourage lower income workers to start saving for retirement.

Editor's Note: The myRA and Roth IRAs are both plans with a good purpose – to help regular Americans save for retirement. The primary challenge for those with moderate incomes is that the majority of these Americans have very limited dollars available for retirement savings. The MyRA and Roth IRA programs will be helpful, but it also will be most important for these workers to obtain education in financial management skills so there are more funds available for retirement savings.

Published January 31, 2014

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