Tags: Retirement | obama myRA | differences | 401k

5 Differences Between Obama's myRA and 401(k)

By    |   Tuesday, 05 May 2015 01:17 PM

In 2014, President Obama introduced a new way for Americans to save for retirement. The myRA savings plan is aimed at helping people who have no retirement savings or no options to save through their employer get started.

While employees have to use direct deposit from their paychecks to make myRA contributions, the plans are not actually sponsored by an employer like a 401(k).

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Here are five differences between Obama's myRA and a 401 (k):

1. Pre or post tax dollars: A 401(k) contribution is taken with pre-tax dollars. That means at tax time your income is reduced by the total amount of contributions you put in a 401 (k) before your tax bill is figured. The myRA accounts simply operate on a direct deposit basis. The money goes into a Roth IRA, which is always a post-tax investment.

2. Control over investments: The myRA is only invested in United States Treasury Security. It is a stable — low interest earning — investment. The 401 (k) gives investors the opportunity to choose the funds into which their contributions are placed. The potential for growth is much higher, but also carries risk, which the myRA does not.

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3. 401 (k) usually comes with a match: Most employers who sponsor 401(k) retirement plans provide a matching funds incentive to employees for participating. This is like free-money, but only if you invest. For myRA accounts there is no contribution from the employer.

4. A 401(k) often has a vesting period: Most 401(k) participants must work at a company for a certain number of years before the matching payments from an employer fully belongs to the employee. The myRA account always belongs to the employee. The employer has no ownership. They simply help facilitate the payroll deduction.

5. myRA accounts are more limited: The maximum allowed in a myRA account is $15,000. There are no such maximums for 401(k) accounts. There are also lower contribution limits to a myRA account than a 401 (k). In 2015, up to $18,000 can be contributed to an employee 401 (k). The myRA limit is $5,500, according to IRS regulations.

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In 2014, President Obama introduced a new way for Americans to save for retirement. The myRA savings plan is aimed at helping people who have no retirement savings or no options to save through their employer get started.
obama myRA, differences, 401k
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2015-17-05
Tuesday, 05 May 2015 01:17 PM
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