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U.S. Ends MyRA Retirement Savings Program by Jack Winter, CPA

Posted on October 11, 2017 by Jack Winter

In July 2017, the U.S. Treasury announced it would be winding down and eliminating the Obama-era MyRA retirement account savings program in the coming months due to low participation and high management costs over its two-year run.

 

President Obama introduced the MyRA program in 2014 as a way to help low- and middle-income households begin saving for retirement when they do not have access to Individual Retirement Accounts (IRAs) or 401(k) plans offered through their employers. According to the Treasury Department, while approximately 30,000 Americans created MyRA accounts, one-third did not make any contributions to the plan, and two-thirds of the accounts have a meager median balance of $500. Since its inception in 2014, it has cost more than $70 million in taxpayer money to manage the program.

 

MyRA participants will receive a notice informing them of the program’s demise along with information about moving their savings to a Roth IRA. With these types of accounts, savers can continue to make contributions with after tax dollars and take distributions in retirement tax-free. The only difference is that Roth IRA savers will have the ability to invest their contributions in a broad range of potentially high return investments, rather than safe and steady Treasury savings bonds. For 2017, individuals may contribute up to $5,500 to a Roth IRA, or $6,500 when they are older than 50.

 

It is advisable that MyRA participants make a direct rollover of their savings into a Roth IRA to avoid any potential taxes or penalties on their earnings, which can occur when they take a distribution of earnings from their MyRA savings.

 

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with individual taxpayers and entrepreneurs on estate planning, tax structuring and business consulting.  He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000, or via email at info@bpbcpa.com.

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