MyRA Savings Plans

The myRA Plans act like a Roth retirement plan when it comes to tax treatment. That means that you put in after-tax dollars to the retirement plan. This is helpful because as you withdraw the money, there is no additional tax added because you have already paid it. The interest gained on the funds is not taxed either. Unfortunately, there is no tax deduction or other benefit for contributing money to the account.

Other advantages include:

• You can withdraw the money in the plan whenever you want without penalty.
• The investment is backed by the U.S. government (the investment is solely in government bonds), so you can never lose your original investment, making myRA one of the safest retirement investments available.
• There are no fees or hidden costs to diminish your annual returns.

myRA offers the same tax advantages of a Roth IRA plan, but is more flexible and provides a safer overall investment. myRA can even be used to supplement an already existing 401(k) plan.

Limitations of the myRA Savings Plan

Because the myRA Savings Plan is so safe, the return on the investment is relatively low. Most investors will see a 3 percent return, on average.

Investors are also limited in how much they can contribute to the account on an annual basis. Savers can contribute up to $5,500 per year. However, a myRA account can never be over $15,000. That means that when the account hits that limit, it must be rolled over into a traditional retirement savings account or withdrawn. The accounts also have a 30-year limitation, even if they do not hit that $15,000 mark.

This is the main reason that myRA plans are sometimes referred to as "starter" retirement plans. myRA Plans can be a great way to begin saving for retirement, especially considering the tax advantages, but they should not be your only retirement-savings tool.