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Old 07-31-2017, 10:21 PM
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Default myRA retirement plan is dead. Here’s some alternatives for your funds

From marketwatch:

myRA retirement plan is dead. Here’s some alternatives for your funds.

Arielle O'Shea, NerdWallet Published 5:58 p.m. ET July 28, 2017

The Treasury Department announced Friday that it is ending the Obama administration’s myRA program, a savings account designed to help low- and middle-income savers put money away for retirement.

The myRA launched nationwide in 2015 as a spinoff of the Roth IRA. It was positioned as a starter retirement account, giving savers the ability to make contributions directly from their paychecks. The account had the same income eligibility requirements as a Roth IRA but offered Treasury savings bonds as the only investment option, appealing to savers who feared losing their principal.

In a press release about the end of the program, U.S. Treasurer Jovita Carranza said a review of the myRA program found it wasn’t cost-effective.

“The myRA program was created to help low to middle-income earners start saving for retirement. Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program,” Carranza said in the statement.

That low demand may have been due to the fact that there are other — potentially better — retirement savings vehicles out there, including the Roth IRA. Here’s how to invest for retirement in absence of the myRA.

Transfer your account

The myRA website was quickly replaced with a short FAQ, which noted that the Treasury Department would reach out to current account holders with information about how to close or transfer existing accounts.

The best place to transfer that money is a Roth IRA, which was the basis for the myRA in the first place. The accounts share many similarities — the myRA was intended as a steppingstone to the Roth IRA, and myRA accounts had a balance limit of $15,000, at which point investors would be asked to transfer their balances, anyway.

To transfer your balance, open a Roth IRA and ask the account provider to help you initiate a direct rollover, which will seamlessly move your money between accounts. Most brokers will allow you to quickly open a Roth IRA online.

Don’t take a distribution

The alternative to a direct rollover is to take a distribution of your account balance. Because myRA contributions are made after taxes, they can technically be pulled out at any time, tax- and penalty-free.

However, doing so is a blow to the retirement savings you’ve built, and you could be taxed or penalized if you also withdraw the earnings on those contributions.

Let’s say you’re 35 and you have $10,000 in the account. That may not seem like much when you consider how much you’ll need for retirement, but over the next 30 years, it could grow to nearly six times that amount in a Roth IRA, assuming a 6% investment return. That’s with no additional contributions on your part.

Invest your balance

What a myRA didn’t offer that a Roth IRA does: the ability to select investments beyond ultra-safe Treasury savings bonds. Roth IRA providers offer a wide selection of investment options, including low-cost index funds and exchange-traded funds.

These funds allow you to buy a basket of investments — like stocks, bonds or both — in a single transaction, by tracking an index like the Standard & Poor’s 500. They’re an inexpensive and quick way to build a diversified portfolio, which reduces your risk.

“A Roth IRA is a great alternative; an investor would likely see better returns because they are moving from one government fund to an open investment architecture,” says Steve Minkoff, a certified financial planner in San Francisco.

If you have a long time horizon, investing in an index fund that holds stocks will allow your money to grow much faster. According to a recent analysis by NerdWallet, choosing a safe vehicle like a savings account over investing in the stock market could result in a $3.3 million difference in how much you’re able to accumulate over 40 years. The low-return savings bonds offered within a myRA are likely to fall short in a similar fashion.

Continue to make contributions

There is one feature of the myRA that can’t be easily replicated with a Roth IRA, and that’s the ability to make contributions automatically via paycheck deferral.

That means you have to self-motivate a bit, by setting up automatic contributions to your new Roth IRA. Ask your bank to make that transfer at the beginning of the month or after your first paycheck of the month, so the money is saved before you have a chance to spend it.

In 2017, you can contribute $5,500 to a Roth IRA, or $6,500 if you’re 50 or older. Any contributions you’ve made to your myRA this year will reduce that limit.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

The article Obama-Era Retirement Plan Is Dead. Here’s an Alternative originally appeared on NerdWallet.
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Old 07-31-2017, 11:26 PM
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Any politics aside, the myRA program was silly from the start... It was a solution searching for a problem. The only real benefits of them compared to an IRA was the low contribution requirements (so you could do just $20/mo if desired), and the automatic contributions from your paycheck. Everything else about it, you could get with a standard Roth IRA, and it'd be a better option for you overall anyway.

You can set up automatic contributions very easily into a Roth IRA, and many companies intentionally have low requirements for starting up Roth IRAs in order to encourage their use... Some can be started with as little as $50 when you also set up automatic contributions.

I say good riddance. The Treasury never did a good job of advertising their existence, and very few people used them because they really weren't a very good option for people.
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Old 08-01-2017, 04:20 AM
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Your reply was Spot on Kork13
There already are so many better options
I wonder why anyone ever thought that was a good idea.
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Old 08-01-2017, 06:39 AM
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Quote:
Originally Posted by kork13 View Post
It was a solution searching for a problem.
Bingo. We said this when they started. I never really saw the point. Just get a Roth and be done with it. If you don't have quite enough to meet a minimum opening deposit, park the money in a savings account until you do.
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Old 08-02-2017, 07:13 AM
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I know it's hard for folks who are average or higher functioning to imagine that there are people out there who could benefit from programs like this. My brother was one who could have benefited from this program. He is intellectually disabled, works part-time, and has a low income. In his situation, I believe $20 per month automatically going to savings bonds would have been a good thing.

Unfortunately, I was not successful at persuading him (and my mother who heavily influences his decisions) to participate. And maybe that was a good thing, now that the program is gone.

Only slightly off-topic, I do wish Treasury Direct allowed IRA accounts where treasuries could be purchased directly.
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Old 08-02-2017, 08:08 AM
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Quote:
Originally Posted by james.hendrickson View Post
From marketwatch:

“The myRA program was created to help low to middle-income earners start saving for retirement.
Quote:
Originally Posted by scfr View Post
I know it's hard for folks who are average or higher functioning to imagine that there are people out there who could benefit from programs like this. My brother was one who could have benefited from this program. He is intellectually disabled, works part-time, and has a low income.
I think the main issue is that in general low income workers are highly unlikely to be concerning themselves with saving for retirement. Most don't even want to give up $20/paycheck. I don't doubt that enrollment in these plans was minimal.

If you have the rare person who actually cares about saving for the future, there are already ways to do that.
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Old 08-02-2017, 02:28 PM
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Quote:
Originally Posted by kork13 View Post
Any politics aside, the myRA program was silly from the start... It was a solution searching for a problem. The only real benefits of them compared to an IRA was the low contribution requirements (so you could do just $20/mo if desired), and the automatic contributions from your paycheck. Everything else about it, you could get with a standard Roth IRA, and it'd be a better option for you overall anyway.

You can set up automatic contributions very easily into a Roth IRA, and many companies intentionally have low requirements for starting up Roth IRAs in order to encourage their use... Some can be started with as little as $50 when you also set up automatic contributions.

I say good riddance. The Treasury never did a good job of advertising their existence, and very few people used them because they really weren't a very good option for people.
Sure, assuming you have a bank account.
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Old 08-02-2017, 02:34 PM
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Originally Posted by Petunia 100 View Post
Sure, assuming you have a bank account.
As I said, a low income worker, the sort who may not even have a bank account, is unlikely to be concerned about retirement savings.
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Old 08-03-2017, 05:20 AM
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I realize we all have different backgrounds and options depending on where we are in the world ...however I believe that ANYONE regardless of income can save and many roadblocks to doing things are SELF inflicted.



1) banks: even a basic account are often easy to open for small amounts

2) auto transfers: a LARGE portion of employers ONLY have direct deposit payroll most with the option to be split into different accounts etc that can be updated if you open a new account

3) programs : why do so many Seem to think the only way to do anything is through some bloated inefficient program??
example : I had a co-worker who was thrilled with ACA because her husband had never had insurance ..I asked was it hard to buy before ??
She actually said " I don't know we never looked into it........... but the MEDIA says we could not afford it before this program so it is a good thing" I still am shaking my head on that one.

I have worked in everything from part time retail to large manufacturing and the level of financial knowledge and planning had Very little to do with AMOUNT of income but the MINDFRAME of the person.
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