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Early 2016 might seem like a bad time to start investing for retirement. With headlines like “Wall Street Shattered” and “Dow Plunges,” most investors aren’t exactly excited about contributing to their retirement funds. However, if your household is one of the 38 million in America without any retirement assets, this is exactly what you should start doing.
And with the help of a new retirement product from the U.S. Treasury Department, you can now invest without worrying about your account losing value.
How is this possible? Say hello to a brand-new retirement account called MyRA. MyRA was specifically designed for the 45% of working Americans who are not saving for retirement. MyRAs provide a place for individuals to grow a $15,000 asset base, while avoiding many of the hurdles and risks and all of the expenses that IRA investors typically face.
MyRA accounts abide by IRA income and contribution limits. That means single filers with incomes under $131,000, and married couples filing jointly with incomes under $198,000, can contribute. The maximum contribution amount is $5,500 for 2016, or $6,500 if you’re 50 or older or will turn 50 by the end of the year. Once a MyRA account balance reaches $15,000, the investor rolls it over to a Roth IRA.
Like contributions to a Roth IRA, MyRA contributions are made with after-tax dollars, and withdrawals in retirement are tax-free.
If you have yet to start saving for retirement, here are five reasons why you should consider opening a MyRA:
1. They’re safe. Your contributions are FDIC-insured, so you won’t lose a penny.
2. They’re cheap. With no minimum contributions, no loss in share value, no trading fees and no broker commissions, MyRAs are an affordable way for new investors to build wealth.
3. They’re easy. You can sign up online in just a few minutes at myra.gov. Once you do, choosing how to invest is simple. In fact, you don’t have to choose at all. All contributions are invested in the Government Securities Investment Fund. The goal of that fund is to give you a return that is higher than inflation and shield your investment from risk. Not a bad place to start building your nest egg.
4. They’re accessible. MyRA contributions can be made from your paycheck, checking account, savings account or even your tax refund. And while you shouldn’t touch money you have set aside for retirement, you can withdraw your MyRA contributions — but not the interest — any time, without penalty. (Seriously, though, just leave those contributions in there.)
5. They’re a good start. We all know winning Powerball is not a viable retirement funding strategy. You’ll need real money to pay for real expenses when you’re too old to work. So if you don’t have retirement benefits through your employer, start building the retirement assets you’ll need in a safe space with a MyRA.
After all, no one ever saved a million dollars without first saving $15,000.