Personal Finance Word of the Day: myRA

retirementIf you saw President Obama’s recent State of the Union Address, you’ve likely heard this term. MyRA is a new retirement savings account. President Obama signed an executive order instructing the Department of Treasury to create the account.

The primary goal of myRA is to assist low- and middle-income Americans who lack access to employer-sponsored retirement plans.  The myRA account is described as a starter-IRA, which is structured much like a Roth IRA funded with after-tax contributions. Participants can make initial investments as low as $25 and contributions as low as $5 can be made through payroll deductions.  In addition, participants can choose to keep the same account when they change employers and can roll the balance into a private-sector retirement account.

The product will feature principal protection, so the account balance will never go down in value. According to a White House statement: “The security in the account, like all savings bonds, will be backed by the U.S. government. Contributions can be withdrawn tax free at any time.”

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