This month the U.S. Treasury Department announced myRA, my Retirement Account, a starter retirement account intended to help people start saving money for retirement. It is intended for those who have not been saving and do not have access to a retirement plan from their employer.
On their website www.myRA.gov, myRA is being presented with the following advantages:
- Simple, Safe, Affordable
- No cost or fees
- No complicated investment options
- No risk of losing money
- Allows contributions to be withdrawn at any time without penalty
So let me dissect this a little further. myRA is “simple” because it’s basically a savings account. It is “safe” because, like a savings account, you are guaranteed not to lose money. The interest rates are typically higher than a bank savings account, with an annual rate of return of approximately 3%. So, with an inflation rate of approximately 3%, at least you won’t lose any buying power. It is “affordable” because there are no fees, as is the case for many other investment vehicles.
Ladies, don’t get it twisted. myRA is NOT a retirement account and it is misleading for you to believe so. The name myRA is misleading. myRA really should be called myEFA because it is an Emergency Fund Account, rather than a Retirement Account. The function of a retirement account is to provide income to the investor once they are retired. The function of a retirement account is NOT to provide income to the saver when they hit a rough patch financially and need to dip into their account to make it through. A retirement account is not supposed to be your piggy bank.
A myRA allows contributions to be withdrawn at any time without penalty, similar to a savings account. One of the reasons a retirement account has a withdrawal penalty is to act as a deterrent for dipping in to it before you retire. With an myRA that deterrent no longer exists and the saver is relying on will power to prevent withdrawals. Once again, myRA is not a retirement account.
The maximum annual contribution for a myRA for those under age 50 is $5,500. And you are allowed to save up to $15,000 before transferring to a Roth IRA, an ACTUAL retirement account.
As quoted on the www.myRA.gov website, “Open a myRA, build up savings, then move on to other investments.” – Ladies, remember this! myRA is not intended to be a long term retirement solution.
myRA is intended to allow you to save money, make a little interest to account for inflation, avoid the fees of other savings plans, and then transfer your myRA account to a Roth IRA. If your employer does not provide a 401k or Roth IRA option, and you do not feel comfortable setting up a self-directed Roth IRA, then myRA could be a decent option. Something to keep in mind: As you are saving money in your myRA, the sooner you get trained on how to make money in the stock market (including risk management so that you no longer fear losing money and FOCUS on making money), the sooner you can make 3% per MONTH, not 3% per year.
Education alleviates fear!
Peace and blessings to you!
P.S. – Ladies, if you know the importance of financial independence, please share this post with the women in your lives who are important to you!