KUSA - A new retirement plan that generated a lot of buzz after the State of the Union address was President Obama's executive order to create MyRA accounts to help Americans save for retirement.
A MyRA is a new starter retirement savings account that can be offered through payroll deduction.
The goal is to help millions of American begin to save for retirement by targeting workers who lack access to employer-sponsored retirement plans, such as a 401(k).
Many workers who do not have an employer sponsored plan are not saving for retirement.
Without plans like a 401(k), employees don't have the option to defer their salary through payroll deductions.
Studies show that they don't go to a bank or other financial institution to open an IRA for retirement savings.
Several key benefits include principal protection, cost, and tax treatment. The principal contributions are guaranteed, and should never go down.
From an employer standpoint, the accounts will have little to no costs because employers will neither administer them nor have to make matching contributions. From a tax standpoint, the accounts will be treated like a Roth IRA.
There is no initial tax deduction for contributions, but earnings grow tax-deferred, and can be distributed tax-free at retirement.
Details on the MyRA include a $15,000 maximum value before it needs to be transferred to a Roth IRA, and earnings limitations of $191,000 for taxpayers filing married filing jointly.