Tags: Retirement | obama myRA | pros | cons | savings plan

Pros and Cons of Obama's myRA Savings Plan

By    |   Tuesday, 05 May 2015 01:56 PM

President Obama started the myRA retirement savings program through the United States Department of the Treasury to help more people get ready for retirement. The plan is aimed at helping people who do not have access to an employer sponsored retirement program, like a 401 (k), be able to save for retirement.

According to CNN Money, about half of all workers and about three quarters of part-time employees are in this position. If you are thinking of starting a myRA to help supplement your retirement, here are some pros and cons to consider:

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Pro - No fees: The myRA accounts are designed for people who don't want to pay money to earn money. According to Bankrate, there are no fees on the myRA accounts, unlike other investment-based retirement fund options.

Con - No choice: According to the U.S. Department of the Treasury, the myRA accounts are invested only in government backed securities. In other retirement accounts, investors have more choice about how their funds are invested.

Pro - No risk: The myRA investments are totally risk-free. They are based on United States Treasury security, which has earned an average yearly interest rate of about 3.19% over the last 10 years.

Con – Lower rewards: The guaranteed return may be a benefit for those looking for a reliable and safe investment. It will not, however, likely bring the greatest rewards. Many mutual funds earn average interest rates much higher than 3.19%. Of course, that money is not guaranteed.

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Pro – A simple place to start:
Unlike the investment decisions required for 401 (k) plans and other Roth IRA plans, the myRA investment is limited to the U.S. Treasury Security. It is very simple and straight forward, which could provide some confidence for those who have never invested money for retirement before.

Con - No employer match: While employers administer the deposits of the myRA accounts, they are not able to contribute to the accounts on behalf of their employees. This means, no potential matching funds from an employer to boost incentives to save.

Pro - A myRA can be used in addition to a 401 (k): The myRA can be used to supplement 401 (k) savings for employees who have the option. This means more potential retirement savings. Like other Roth IRA accounts, the money going into these funds is taxed, but the money coming out during retirement is not taxed.

Con - The upper limit of the fund is $15,000: The myRA accounts should really be considered starter funds for retirement. Once the savings and growth of the funds reaches $15,000 or 30 years has passed, the funds must be rolled into a regular Roth IRA. The money can continue to grow tax-free in a regular Roth IRA.

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President Obama started the myRA retirement savings program through the United States Department of the Treasury to help more people get ready for retirement.
obama myRA, pros, cons, savings plan
Tuesday, 05 May 2015 01:56 PM
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