The President Announces New Retirement Account Plan for Americans Who Don’t Have Access to 401K Accounts

In his State of the Union address this week, President Obama, announced that he will order the Treasury Department to offer a new, government-backed savings plan, called “MyRA," for the more than half of Americans whose employers don’t offer retirement plans.

The plans, available to workers who make less than $191,000 per year, would function like a Roth IRA and have government backing like a savings bond, meaning the account balance cannot go down.

Businesses will not be responsible for administering accounts. They will simply offer them to their employees, and those who decide to participate, can have investment amounts ($25 to start and as low as $5 subsequently) deducted as payroll.

Additional items to note:

• Unlike Roth IRAs, there will be no tax penalties if the investments are withdrawn.
• MyRAs can be carried over from one job to the next, and they can be rolled into a private sector IRA at any time.  (Once an account grows to $15,000, it must be rolled over into a private-sector Roth IRA.
• MyRAs would have the same variable interest rate return as the Thrift Savings Plan Government Securities Investment Fund accounts that federal employees enroll in.

As with any investment account, having proper beneficiary designations is critical!