What is a myRA?
The myRA (for my Retirement Account) is a new workplace retirement savings account available through the U.S. Treasury Department. The myRA is a Roth IRA (with some special features) funded by payroll deduction.
It's hoped that employers that currently don't offer a workplace retirement plan will make myRAs available to their employees. However, even if your employer doesn't have a formal myRA program, you can set up an account online at myra.treasury.gov and simply provide a direct-deposit form to your employer.
Your contributions to your myRA account are made on an after-tax basis through payroll deduction. (Your employer doesn't contribute to, or administer, your account.) You can contribute up to the annual IRA limit--$5,500 in 2015, $6,500 if you're 50 or older (that limit includes all of your myRA, traditional IRA, and regular Roth IRA contributions).
Your contributions are invested in newly created government bonds that earn the same variable interest rate that's available through the government's Thrift Savings Plan G Fund, which earned 1.89% in 2013 and 2.31% in 2014. Your account principal is fully protected--the value of your account can never go down, and the bonds are backed by the full faith and credit of the U.S. government. You can keep, and continue to contribute to, your account if you change jobs.
You can withdraw your funds at any time. Your own contributions are tax free when withdrawn. Earnings are also tax free if you're at least 59½, disabled, or a first-time homebuyer (limits apply), and you satisfy a five-year holding period. You can transfer your account to a private-sector Roth IRA at any time. However, once your account reaches $15,000 (or you've had the account for 30 years, whichever comes first), you must transfer the account to a private-sector Roth IRA.
The distinguishing features of a myRA are the ability to contribute through payroll deduction, access to the new retirement bond, safety of principal, and the ability to make very small contributions. Also, there are no fees to establish or maintain the myRA. However, with its single investment option and $15,000 cap, the myRA lacks the flexibility of a regular Roth IRA, which for many may be the better option.