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Now Trending: The myRA

If you have $1 (one dollar) in your retirement account and you are age 25-64, congratulations you have more money in your retirement account than 45 percent of Americans in that age bracket. Many Americans are not saving for their retirement at all and that is a problem!

Your retirement goal is to have sufficient funds to relax and enjoy your senior years without having to work.  Many have come to despise this goal because they feel it is unattainable, unrealistic or even cruel. There are no magic strategies in investing. I’m not one to preach stocks, or real estate, or commodities, but ask yourself one question: Who will fund my retirement if I don’t? Bottom line, you have to start somewhere and go someplace. There is a new retirement program available now.

This new program is called myRA. Employers are not required to participate in the new program. The myRA account is administered through the United States Treasury. The plans can be funded by an employer, a personal account, or even from a federal tax refund. The employee must have earned income to participate. A key to the new program is that there are no administrative costs.

To participate, the fund participant goes to, selects the “sign up” option, and follows the step-by-step process. They receive an account number and then fund the account by setting up automatic deposits through their employer, their own accounts, or federal tax refund. If the employer already has a retirement account such as a simple or 401K, then the myRA is not available.

When funding the plans, individuals can give a set percentage of money per payroll period or contribute as they go along. There is no minimum contribution. There is no initial startup fee.

Any money put into a Traditional IRA reduces the employee’s taxable income. The limit an employee can contribute is $5500 annually. That is unless they are 50 or over, they can add an additional $1000 to their annual contribution for a total of $6500 per year. Income limits are $131,000 for single taxpayers and $193,000 for married filing jointly.

The myRA is a Roth IRA. In a Roth IRA, the individual does not get a dollar-for-dollar adjusted gross income adjustment, but instead the funds are tax free when taken out upon retirement. Thus, the employee must contribute after tax dollars now.

Additionally, retirement accounts are generally exempt in a bankruptcy.  Bankruptcy is a common occurrence, no matter what a person’s income or holdings may be. Having money protected in a retirement account has advantages compared to ordinary savings accounts, CDs, and checking accounts.

The major objective of the new program is to get individuals of all ages into a retirement fund. This new program has a good rate of return.  The fund invests in 30 year Treasury savings bonds that have returned 3.19% over the past 10 years. The good part about this account is it cannot lose money. There are no complicated investment strategies, unlike many other funds.

The only drawback is that these accounts are mainly starter accounts. The balance limit is low. Once the account balance reaches $15,000 or the account is in existence 30 years (whichever is first), the account holder must rollover the account into a private account. Once this is done, the investor cannot begin another myRA.

This law did not eliminate or limit the use of Roth and Traditional IRAs in anyway. An IRA can be started online or at a local bank with hardly any startup costs.

While this program is not for everybody, it hopefully will get the ball rolling for millions of Americans. If you have any questions about the subject matter herein, Business Valuations, Business Succession Planning or would like additional information, please contact the professionals at The Center at (618) 997-3436.

By: Roman Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors