By Sheryl Rowling
SAN DIEGO– Dear Money Maven: Why is President Obama talking about Myra? Who is she? It seems like she’s in the news a lot and I haven’t even heard of her! I feel like I’m losing my edge.
Sincerely, Yenta
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Dear Yenta,
You are not falling behind on your job. MyRA is actually short for “My Retirement Account.” It’s not a person at all! It is supposed to be a new retirement plan alternative for “regular people” that would be guaranteed to not lose money. I hope this helps!
Sincerely,
Money Maven
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Dear Money Maven,
I have a part-time job at the JCC while I go to school. I can’t afford to save much. Would a MyRA be right for me?
Prudently,
Polly
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Dear Polly,
The MyRA could be a convenient way for you to save for the future. You only need $25 to open an account and you can add as little as $5 per paycheck through payroll deduction. There are no fees and all earnings will be tax-free as long as you hold the account for at least 5 years and reach age 59-1/2. So, it’s obviously meant for long-term savings. If you open the account for $25 and contribute $5 twice a month for 40 years at 3% interest, the value of your account will grow to $9,350. (Of course, as you get older and have a full-time career, you will hopefully be able to save even more!)
All the best,
Money Maven
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Dear Money Maven,
I teach music at a private school and contribute the maximum amount to a Roth IRA each year. Should I switch to a MyRA?
Judiciously,
Joe
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Dear Joe,
I would say no. A MyRA is essentially a Roth IRA that is limited to investing in only U.S. government bonds. Your Roth IRA allows investments in anything, including government bonds. The tax rules are essentially the same: you don’t get a deduction when you contribute, but it all grows tax free forever. Actually, when a MyRA reaches $15,000 or 30 years, it is required to be rolled into a Roth IRA. So, for you, I recommend keeping your Roth IRA and the investment flexibility it allows. Also, if you’ve been contributing the maximum $5,500 per year ($6,500 if you’re over 50), you’ll exceed the maximum $15,000 balance very soon!
Keep up the good work!
Money Maven
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Sheryl Rowling is a certified public accountant, personal finance specialist, and principal of Rowling & Associates. She may be contacted via sheryl.rowling@sdjewishworld.com
I see no harm in it. My working class parents didn’t open an IRA until their three kids were out the door. When they did, they thought big deal, it will never amount anything. But as it slowly grew, they got more interested. They ended up with more than enough to support a comfortable life in a small Midwestern town. If MyRAs introduce people to saving, I am all for it.