President Obama introduced a new retirement savings plan during his State of the Union address.  Geared toward workers who do not have an employer-based plan, the myRA is designed as a “starter” retirement savings account for those whose small contributions to a traditional or Roth IRA would be eaten up by investment fees. The myRA addresses the issue of high minimums by setting the initial investments low: it costs $25 to open an account, with a $5 minimum contribution per paycheck.

Subsequent to the initial investment, the money can be rolled into a Roth IRA after 30 years or when the balance reaches $15,000.  The money is invested in the Government Securities Investment Fund (G Fund).

Like a Roth IRA, myRA contributions are made with after-tax dollars and grow tax-deferred.  Also like a Roth, the availability will be limited by income (married couples with modified adjusted gross incomes up to $191,000 and individuals earning up to $129,000). The money put into a myRA account can be withdrawn tax-free at any time without penalty, subject to the same restrictions as the Roth.

That said, the myRA is different from the Roth in that:  1) it requires a low minimum investment; 2) participants will be able to contribute through payroll deductions; and 3) there is no investment fee cost.

To recap the basics, the myRA is a starter plan for someone who has no employer-based savings plan, is under a specific income threshold, and may have limited funds to contribute.  Retirement plans are often included in one’s estate plan; as such, examination of a plan befitting and furthering your specific needs and goals should be discussed with a financial or estate planning professional.

Contributed by MH Phoenix Estate Planning Attorney Andrea Claus.

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At Morris Hall, we have focused our legal practice on estate planning for over 40 years.  Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects.  We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.