In his 2014 State of the Union Address, President Obama announced plans for a new retirement investing option for Americans who are generally unable to invest for retirement due to low income.
The plan promises a decent return with zero risk of losing initial investments. The plan is slated to roll out later in 2014 and offers plenty of potential benefits to low income families that want options for retirement planning.
Considering that the 2014 Employee Benefit Research Institutes Retirement Confidence Survey states that only 57 percent of todays workers are currently saving for retirement, and Social Security is not looking promising for many of todays workers, some investment options are certainly better than whats currently available to many low and lower middle income families.
Survey link – https://www.ebri.org/pdf/briefspdf/EBRI_IB_397_Mar14.RCS.pdf
Facts about MyRAs
Before you decide whether or not myRA is a good plan for you, here are a few facts to consider.
* Like Roth IRAs, myRA has a $5,500 yearly cap.
* There are no administration fees, meaning that 100 percent of the funds you invest actually go into the retirement account.
* The initial investment requirement is small, only $25 at this time. As well as that, investors may choose to add as little as $5 per pay period to the fund, making it less painful for small income families to adopt.
* Because the investments are smaller than traditional IRA investments, it encourages people to make small investments.
* Money is taxed before going into the account. This means that the growth on these funds is tax free.
* Since the money is taxed before its invested, it is not taxed when you withdraw the money upon retirements.
* Zero risk (which is something you never hear when talking about investments). According to the President there will be no risk of losing the funds initially invested.
* MyRAs make investing available to a wider segment of the population.
* With employer agreement, contributions may be automatically deducted from paychecks and funneled into your retirement account.
Other Considerations
The above doesnt mean that all the news is good about myRA or that it sets the stage for a comfortable retirement. Granted, some retirement savings, particularly savings that will not be taxed upon receipt, are better than none. That being said, myRA is a low-risk investment strategy that, unfortunately, offers low rewards.
For middle income investors, there are better options many through employers. However, for low income workers, who often have few, if any, employer-sponsored investment options, myRA offers the option for a small retirement nest egg, which is something many families lack altogether.
The low risk of myRA is also attractive for people who may have decided to stop saving for retirement in the aftermath of recent economic woes that saw robust retirement savings dwindle into nothingness. While myRA savings are not ideal for everyone, they offer an attractive option with minimal risks and small returns to many people who would otherwise be unable to invest in their own retirements. Only you can decide if its a good idea for you, though.