A little help is coming to the millions of Americans who are struggling to save for retirement: The U.S. Treasury announced on Wednesday that its “myRA” program will launch nationwide, allowing people to fund these unique retirement savings accounts with checking or savings account transfers.
During a pilot period for the accounts, myRA contributions were limited to payroll deductions, which had to be approved and initiated by employers. The new open access will make the accounts available to more people. A myRA account can be opened through the Treasury’s myRA website.
“MyRA is designed to remove common barriers to saving, and give people an easy way to get started,” U.S. Treasury Secretary Jacob J. Lew said in a statement about the national rollout. “MyRA has no fees, no risk of losing money and no minimum balance or contribution requirements. To make saving easier than ever, you can now put savings into a myRA directly from your bank account.”
Taxpayers will also have the option to direct all or part of their 2015 federal tax refund into a myRA.
The myRA is President Barack Obama’s answer to the country’s ongoing struggle to save for retirement, a problem that can at least partially be blamed on limited access to employer-sponsored retirement plans, such as 401(k)s, particularly for low earners. According to data from the Bureau of Labor Statistics, employer retirement plans are available to just 31% of private-industry workers in the lowest wage category, compared with 88% of workers in the highest-wage category.
“MyRA can give people confidence that they’re taking steps in the right direction, and it can serve as a bridge to other savings options that will carry them the rest of the way,” Lew said in the statement. “MyRA alone will not solve the nation’s retirement savings gap, but it will be an important steppingstone for encouraging and creating a nation of savers.”
The myRA functions as that bridge by combining a low barrier of entry with no fees and no risk. There is no minimum amount of money required to open the account, and money contributed is invested in bonds backed by the U.S. government. Those bonds provide a safe — but low — return compared with the stock market.
The account has eligibility requirements and contribution limits that mimic a Roth IRA: Savers can make the full contribution of $5,500 per year if their adjusted gross income is below $183,000 as a joint filer or $116,000 as a single filer. Once $15,000 has accumulated in a myRA, the account holder will have to transfer the funds to a private-sector Roth IRA.
For most savers, a Roth IRA is a better option from the start. The limited returns from the bond investments in a myRA aren’t enough to accumulate a retirement nest egg, while a Roth IRA gives savers access to a large investment selection that includes mutual funds, index funds, ETFs and even individual stocks.
But many of those investments — and some of the online brokerages that offer Roth IRA accounts — have high minimum requirements of $1,000 or more, so the myRA can be a way to build up that capital.
More from NerdWallet:
- No 401(k)? Consider a myRA
- Best Roth IRA Account Providers
- 5 Small Changes in Retirement Planning that Get Big Results