My Retirement Account (myRA)

In 2015, the U.S. government introduced a new individual retirement account (IRA) option called myRA. Similar to a Roth IRA, myRA works as a traditional IRA with a few modifications.

Just as in a Roth IRA, myRA deposits are made with after-tax dollars, meaning that they are taxed going in, but not coming out of your account. Once deposited, these funds grow tax-free and are not subject to the required minimum distribution (RMD) rules associated with a traditional IRA.

As long as you have owned the myRA account for at least five years and you are at least 59 ½ years old, distributions carry no penalties for withdrawal. Accounts have no minimum deposit requirements and deposited funds are backed by the U.S. Department of the Treasury.

This federal backing means there is no risk of losing money. However, no risk means that investment rates of return likely will be low. This can result in purchasing power risk where the after-tax return on an investment is less than the rate of inflation.

A myRA account is not intended as a substitute for employer-sponsored retirement plans. Instead, myRAs provide an alternative for those who have no other retirement savings option or for those who would like to supplement another plan, such as a 401(k).

Like all IRAs, you must have earned income (e.g., salary, wages or net earnings from a business) to contribute to a myRA plan. Although myRA accounts might be offered by employers, the plan is not tied to a specific employer. Individuals can contribute earnings from multiple jobs to a single myRA account. This means that if a worker changes jobs, he or she keeps the account.

There are no administrative fees with myRA accounts, allowing you to make small contributions without worrying about reduced deposits due to administrative plan costs. Contribution limits may change annually, so it’s a good idea to check each year.

  • Single tax filers with a $118,000 income or less can make a full contribution (the contribution is prorated for those with incomes between $118,000 and $133,000). Married tax filers with a $186,000 income or less can make a full contribution (the contribution is prorated for those with incomes between $186,000 and $196,000).
  • Your initial investment can be as low as $25 and deposits can be as small as $5, provided they are made through automatic payroll deduction.
  • The maximum annual contribution is $5,500 — the same as a traditional Roth account. If you are older than 50, you can contribute an additional $1,000, for a total of $6,500 annually (2017 amounts).
  • Once your myRA account balance reaches $15,000, or the account has been open for 30 years, you are required to roll it over to a regular Roth IRA. You can make the switch voluntarily to a Roth IRA at any time, but once the dollar or term limit has been reached, the rollover is required.

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