(Bloomberg) — MyRA, the Obama administration’s free, guaranteed-return starter retirement account, launched nationwide today.
The government-backed plan is an option for the tens of millions of U.S. workers whose employers don’t offer a retirement savings plan. MyRA accounts are open to anyone earning an annual salary of less than $131,000, or $193,00 if they are married and filing taxes jointly.
There’s no minimum to open an account, as with an IRA, and no fee to open one. Payments can go into the plan automatically, directly from a checking or savings account or from an employer’s payroll system via direct deposit. The account is portable from employer to employer.
A MyRA (My Retirement Account) won’t return nearly what a stock fund is likely to return over time, but there’s no risk of workers losing their nest egg. MyRAs will invest only in a U.S. Treasury security guaranteed never to lose value.
Users can access the money for emergencies. In short, it operates a lot like a 401(k) but is basically a Roth IRA with contributions of after-tax money that can be withdrawn tax-free in retirement.
The myRA.gov website notes that “interest earned is the same rate as investments in the Government Securities Fund, which earned an average annual return of 3.19 percent over the ten-year period ending December 2014.”
Over the past five years, that rate has dropped to a little over 2 percent, said Richard Ludlow, executive director of the MyRA program. He added that “the rate is dramatically higher than what people are able to earn on savings accounts.”