The U.S. Treasury has opened a new type of Roth IRA, the myRA , as “a new retirement savings program” especially designed for individuals who have no access to employer provided plans. However, the accounts are open to anyone who falls within the qualifying income limits and wishes to supplement savings.
In order to qualify for myRA accounts one must be a wage earner and have earned income less than $129,000 per year (less than $191,000 per year if you’re a married couple filing jointly).
Under current regulations, an individual can only fund a myRA account by direct deposit through an employer. You can open an account on-line and download a direct deposit authorization form for your employer.
To open an account you will need to have ready:
- Your social security number
- Your driver’s license or state ID
- Home address
- The name, birthday, and address of your beneficiary
The accounts are set up as a Roth IRA and, as such, are included in the 2014 -2015 $5,500 annual IRA contribution limit ($6,500 for individuals aged +50, who can make additional “catch-up” contributions). The contribution limit is an overarching annual limit for all individual IRA accounts: traditional, Roth, and myRA.
The myRA account is set up and run by the U.S treasury. There are no fees associated with the management of the account. Deposits into the account are made from after-tax wages, and the interest accrues tax-free, in accordance with Roth IRA distribution rules.
Savers can withdraw money they put into their myRA accounts tax-free and without penalty at any time. They can withdraw interest earned in their account without tax or penalty five years after their first contribution and if they are 59 ½ years old, or meet certain conditions, such as using the funds for the purchase of a first home. Otherwise, interest earnings would be taxable, and, unless certain other conditions are met, may also be subject to a 10 percent additional tax.
The Treasury site provides a quick review of the rules applicable to Roth IRAs.
The accounts have a $15,000 limit on accumulation of contributions and earnings, as well as a thirty year maximum holding period Once any limit is reached the account is required to be transferred to a privately held Roth IRA. In addition, the account can be rolled over to a Roth IRA at any time , although the Treasury has not yet provided detailed transfer procedures.
Funds will be invested in a treasury bond designed to provide an interest rate that resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity. The bond is designed to match the return of the G Fund, a special account in the Federal Thrift Plan. With this investment principal is protected and the investment earns interest.