Tags: IRA | retirement | savings | MyRAs

Study: 'There Are Better Options' for Retirement Savers Than MyRAs

By    |   Thursday, 12 February 2015 03:27 PM

The Obama administration is setting up a new class of retirement accounts called "MyRAs," but a new study from the National Center for Policy Analysis (NCPA) says current retirement offerings — 401(k)s and IRAs — are superior.

MyRAs are like Roth IRAs in that they contain post-tax contributions, which can be withdrawn, along with interest payments, tax-free upon retirement. But MyRAs can invest only in Treasury bonds.

"While it is true that the MyRA account will not charge any fund maintenance fees to the account holder, as some other mutual funds do, this 'freebie' does not make up for the lower return on investment of the bond fund," NCAP senior fellow Pamela Villarreal writes in the report.

MyRAs tend to deliver lower returns. She notes that Vanguard Windsor II, a large-cap value stock fund, generated a 9.4 percent annual return from 1987 to 2013, compared with only 5.44 percent for the FTSP G Treasury bond fund, which would be a similar rate of return for a MyRA.

"There are better options for savers that offer more investment choices," Villarreal says. "Workers whose employers do not offer a company-sponsored retirement plan should look at traditional and Roth IRAs," she argues.

"With all the available services in the market now, the MyRA is just a poor attempt to reinvent the IRA wheel."

Meanwhile, Emily Brandon, senior editor for retirement at U.S. News & World Report, offers several ideas for keeping taxes on your Social Security to a minimum.

Keep in mind that you must pay taxes on Social Security income if the sum of your adjusted gross income, non-taxable interest income and half of your Social Security income exceeds $25,000. Depending on the total, up to 85 percent of your Social Security income might be taxable.

So obviously you want to keep your income below that trigger level. One strategy to do so is drawing down your 401(k) and IRA accounts before you start taking Social Security, Brandon notes. That money counts as income when you withdraw it.

So withdrawing it before you start receiving Social Security payments lowers your income once you do start receiving Social Security.

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The Obama administration is setting up a new class of retirement accounts called "MyRAs," but a new study from the National Center for Policy Analysis (NCPA) says current retirement offerings — 401(k)s and IRAs — are superior.
IRA, retirement, savings, MyRAs
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2015-27-12
Thursday, 12 February 2015 03:27 PM
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