How myRA, A New Retirement Account, Works

It's time to get saving.

A government-backed individual retirement account announced nearly two years ago by President Barack Obama is now available across the country, the Treasury Department said Wednesday, and it removes several barriers that keep millions of people from saving for their retirement. The account, called a myRA, has no fees, no minimum balance, no risk of losing money and it doesn't have to be linked to an employer.

"It's a great way to start saving for retirement in a low-risk way," said Ed Gjertsen II, president of the Financial Planning Association.

MyRAs are aimed at those without access to employer-sponsored retirement plans like 401(k)s, but anyone under certain income levels is eligible. Workers can have contributions deducted automatically from their paychecks into their accounts, and employers are not charged any administrative fees to do so. Experts say regular, automatic contributions are a crucial way for people to build nest eggs.

Here are more details about the account and how it works:

Q: Who is eligible for a myRA?

A: Individuals who earn less than $131,000 a year or couples who earn below $193,000 a year.

Q: How much money do I need to open an account?

A: None. You can sign up at https://myra.gov . You'll need a Social Security number and either a driver's license, a U.S. passport or a state or military identification number to sign up online.

Q: How do I deposit money?

A: Money can be deposited from a checking or savings account or directly from your paycheck. If you want money to come out of your paycheck and your employer allows direct deposits, myRA provides a form to give to your employer at https://myra.gov/files/myra-direct-deposit-form.pdf . You will also have the option to send your tax refund to your myRA when doing your taxes.

Q: What if I move jobs?

A: The account is in your name, so it stays with you when you change jobs.

Q: Can I withdraw the money anytime I want?

A: Yes. There are no fees or taxes to pay on the money you have deposited, but if you are younger than 59 ½, you will have to pay taxes on the interest that your money has earned.

Q: Is there a limit on how much I can save in a myRA account?

A: Yes. If you're under 50 you can deposit up to $5,500 a year. Those who are or will be 50 or older by the end of the year can deposit up to $6,500 a year. Once the account grows to $15,000, you must move your money to a private-sector retirement account like a Roth IRA.

Q: Is it risky?

A: No. MyRA invests in a fund made up mostly of U.S. government bonds called the Government Securities Fund, and it will not lose money.

Q: How much interest will my money earn?

A: The interest rate changes every month. In the 10 years ending last December, the investment earned nearly 3.2 percent annually on average.

Q: How is this different than a Roth IRA?

A: Many of the rules are the same, but Roth IRAs through banks or brokerage companies generally have fees or require minimum contributions that can be too high for some. Another major difference is that with Roth IRAs you can invest in stocks, bonds, mutual funds or other investments. They can be riskier, but they may earn more money than government bonds. With myRA, the government hopes it can push more people to start saving for retirement and eventually lead them to opening Roth IRAs.

Q: Will this leave me enough to retire on?

A: Almost certainly not. The government and financial planners caution that this is a way to get people to start saving for their retirements.

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