Back in 2015, the Obama Administration established a new type of tax-advantaged retirement account called the MyRA. The MyRA was intended to serve as a starter retirement savings account for Americans who didn’t have access to an employer-sponsored retirement savings plan. It worked much like a mini-Roth IRA. Contributions were not tax deductible, but no tax need be paid on the income earned on the money in the account and withdrawals after age 59.5 are tax free.
Unfortunately, only about 30,000 MyRA accounts were opened in the time since they were first authorized, with only about $34 million in contributions. Citing extremely low demand and high costs, the Treasury Department has announced that the MyRA program will be discontinued. MyRA account holders will be required to convert their accounts into Roth IRAs with private financial institutions of their choosing, who will, presumably, charge them annual fees to administer their accounts. On the bright side, accounts holders will have more investment options. Alternatively, MyRA accounts holders may close out their accounts and pocket their contributions. The Treasury Department says that any MyRA with a zero balance as of September 15, 2017 or later will be subject to “possible automatic closure.”
If you roll over your MyRA into a Roth account, you may have your money directly transferred to the Roth IRA provider or paid directly to you. It’s simpler and safer to use the first option. If you choose the latter, you must transfer the funds to your new Roth IRA within 60 days. If you fail to do so, you’ll have to pay income tax on your earnings and may be subject to a 10% penalty tax.
All MyRA account holders who have set up automatic deposits to their accounts from their paychecks should tell their employers to stop them.
All contributions into MyRA accounts had to be invested in the Government Securities Investment Fund (“G Fund”)—the same Treasury security used for federal employees’ retirement contributions to the federal employee Thrift Savings Plan. Since the MyRA was intended to be a starter retirement account, MyRA accounts were limited to a maximum balance of $15,000, with a maximum of $5,500 invested each year ($6,500 for taxpayers 50 or older). Employers don’t administer the accounts; instead they sent the direct deposit to each participating employee’s MyRA. One big advantage of the MyRA is that no fees were charged to participate in the plan. Moreover, the MyRA went with employees who switched employers.
For more information, visit the MyRA.gov website, or call the customer support line at 855-406-6972 weekdays.