A myRA is a government-administered Roth IRA authorized to hold only one type of investment, a US Treasury security which earns interest at the same variable rate as investments in the government securities fund for federal employees. MyRAs became available in 2014 and were described as being safe, simple, and affordable savings accounts to help low- and moderate-income taxpayers save for retirement.
Why the MyRA Program Failed
Unfortunately for the myRA program, there are a multitude of private sector investment alternatives. Taxpayers have many options in the private market to offer no account maintenance fees, no minimum balance, and safe investment opportunities. Demand for myRA accounts has been extremely low, and the Treasury Department announced that it will be phasing out the myRA program over the next few months. Taxpayers have paid nearly $70 million to administer this program since 2014 and the cost to taxpayers is not justified.
MyRAs are Roth IRAs that Can Only Invest in One Security. When the MyRA Account Becomes Too Big, it Must be Converted to a Roth IRA…Huh?
MyRAs are subject to the same rules that apply to Roth IRAs, including the income-based eligibility for contributions, maximum annual contributions, and tax treatment of distributions. Participants can save up to $15,000 in a myRA account and can hold funds in myRAs for up to 30 years. Once either of these limits is reached, the myRA will have to be rolled into a Roth IRA. So why not just invest in a Roth IRA? Exactly, that is why the myRA is being discontinued. Too bad $70 million taxpayer dollars had to be wasted.
The myRA program is no longer accepting new enrollments. However, existing accounts remain open and accessible, and until further notice, participants can make deposits and their accounts will earn interest. Participants are being notified of upcoming changes, including information on how to roll over their myRAs into Roth IRAs.
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Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.