Don't have a 401(k) plan at work? A myRA might be right for you
About 55 million American workers don't have access to retirement plans at their workplaces, and some who do may not like their choices. In either case, there are alternatives.
IRAs and Roth IRAs have been options for retirement savers for years, giving them more choices and control. But there's a new kid on the savings block with an unbeatable feature: absolutely no fees.
The myRA plan, or "my Retirement Account," is a no-fee retirement savings program that the Department of Treasury launched nationwide in October for low- and middle-income workers.
If you're just getting started saving for retirement and are seeking something with low risks and zero costs, David John, senior strategic policy adviser at AARP, said a myRA might be right for you.
It is free to open, comes with no maintenance fees, is backed by the government and there is no minimum deposit. You can contribute whatever you can spare every payday, even if it's just a couple of bucks. Like a regular Roth IRA, the money you contribute is subject to income taxes, but your earnings are not.
Until recently, the only way to contribute to a myRA is through payroll deduction. But now you can contribute through your checking account. Your contributions are invested in a new U.S. Treasury security created specifically for the myRA program.
One thing to consider, though, is that you can only contribute up to $5,500 per year (or $6,500 for those 50 and older), and there's a $15,000 maximum account balance. After you hit the cap or have held your account for 30 years or longer, you have to roll it over to a private-sector Roth IRA.
In addition, there are income limits. You can't make more than $131,000 per year as an individual or $193,000 for couples.
Just like with a Roth IRA, you can withdraw your contributions at any time without penalty. But taking out earnings might trigger penalties if you are younger than 59½ or haven't held your account for at least five years.
But no matter whether you choose a regular or a Roth IRA, John said, "You have to contribute on a regular basis. Otherwise, retirement still looks bleak."