What Is a myRA?

The myRA is a retirement account operated by the U.S. government specifically for middle- and lower-income families whose employers do not provide retirement plans. The government administers and manages the accounts, and the proceeds from the account are invested in government savings bonds. This ensures that you never lose what you pay into the account; the balance of your account can only go up. This option is available to everyone who uses direct deposit for their paychecks.

When you invest in a myRA, you invest after taxes. This means that, after you pay all withholding taxes on your paycheck, you can invest any percentage of the remaining income in your myRA account. The benefit of this is that, when you withdraw your myRA after you retire, all of the proceeds are exempt from being taxed.

Your initial investment can be as low as $25, and you can make periodic investments for as little as $5 every time you get paid. You can contribute up to $5,500 per year.

You can withdraw your funds at any time, however, if you are under 59 1/2 years old, you may be assessed a penalty and have to pay taxes on the interest generated by your investment. Once you have held your myRA for 30 years, or once the balance gets to $30,000, you will have to transfer the funds into a private sector Roth IRA. Here is a good list of the best online IRAs.

The most obvious benefit of the myRA is that there are no associated management fees like there are with public sector retirement vehicles. You don’t have to worry about transferring your myRA funds to another vehicle if you change jobs. And the low investment requirements make it easier to start one of these retirement accounts. All of these elements are clear advantages over traditional retirement accounts. The downside is the return. Since the funds are only invested in government bonds, there is very low risk but there is also a very low return.

The myRA is a great first step in building a retirement portfolio. It is a safe option with a lot of flexibility. But low returns prevent it from being the sole component in any complete retirement plan.