The MYRA is going to be a savings account for individuals who work for companies that don't offer employer-sponsored plans, such as a 401K. This will be a starter savings vehicle and not designed to solve the whole retirement savings problem, according to Jamie Hopkins, Forbes Contributor, Associate Professor of Taxation at the American College and Associate Director at the New York Life Center for Retirement Income. It is designed to give people access to a preferential tax savings vehicle to which they wouldn't otherwise have access.
One question people are asking is if they can get an IRA or Roth IRA with the same treatment and Hopkins says yes, in that they have access to those but practically, the question is whether they really have the ability to do that. An IRA or Roth IRA usually requires an initial contribution of about $2,000 and a lot of people in the group the MYRA is targeting, does not have this kind of money on hand to put into a retirement account, notes Hopkins. The MYRA, on the other hand, allows people to put in as little as $25 of a starting amount and very small $5 from their paycheck each month. While it's a very small amount, it allows people to get into the mindset and start saving towards retirement.
The MYRA will have a $15,000 cap, after which the government no longer manages the account and the individual will have to move it over somewhere else. It can be moved over to a Roth IRA, as the money will be there to open that up, or because it doesn't look like there will be any penalties for distributions, that money can be pulled out and used for something else. The MYRA might also work well for some people as a short-term savings vehicle because it will give higher savings rates than a traditional bank savings account. For younger people, having $15,000 saved is a really good start and at least they'd be in the mindset of saving for retirement.
Jamie Hopkins, Forbes Contributor, Associate Professor of Taxation at the American College and Associate Director at the New York Life Center for Retirement Income, spoke with Retirement News Today during this interview, providing online retirement news video content. Retirement News Today is a featured network of Sequence Media Group.