best retirement accounts

3 Months Later, Is myRA a Worthwhile Investment?

I have $80.18 cents more than you saved for retirement. (Assuming you have nothing.) Thanks Obama!

On January 22, 2015, I officially began saving for retirement with an account called a myRA. In the president’s State of the Union address last year, he announced the beginning of a retirement account that anyone would be able to open. Backed by the U.S. Treasury, the account will grow at the same rate as investments in the government securities fund for federal employees, which have had an average annual return of 3.19 percent over the last 10 years.

The White House encouraging people to save for retirement is a good thing, especially given a recent survey from the American College of Financial Services that asked Americans about their ability and knowledge about saving for retirement. What they found was disheartening — only 20 percent of Americans could pass a basic quiz on how to make their nest egg last through retirement, and less than a third had a written retirement plan in place.

How I started saving

I signed up for the myRA account because, as a 23-year-old writer, I didn’t have any retirement savings and I haven’t been working long enough to be eligible for my company’s 401(k) plan. It was fast, easy, and straightforward: I went to myRA.treasury.gov to sign up, printed out two copies of the direct deposit form, and took one copy upstairs to my HR department. They were able to transfer the amount designated ($10 per paycheck) directly into my myRA each time I got paid.

According to my balance, I’ve accumulated $80.18 since then, with the 18 cents being the amount of interest earned. At that rate, in 30 years I’ll have saved $10,730. Not a huge amount, but it’s at least a step in the right direction.

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Who should get a myRA?

The accounts are primarily for low- and middle-income Americans, or those in households making under $191,000 a year. CNN Money says that’s roughly half of all workers, and 75 percent of part-time workers.

But it’s also a good supplementary plan for the self-employed. If you are a freelance writer, stand-up comedian, personal trainer, or dog walker, a myRA could be a beneficial addition to your retirement plan.

One key point: The myRA is designed to help people get into the habit of saving, and get them rolling on the road of retirement. But as I noted above, the interest you earn in the account will not be enough to actually last you through retirement, no matter how frugal you are. And there are limits: You can only contribute up to $5,500 per year, and the account maxes out at $15,000. At that point, you’ll have to roll your savings into a private-sector Roth IRA (which I’ll get to in a minute), but the good news is that since the account is tax-free, transferring or withdrawing your money won’t cost anything extra.

Choosing a plan of your own

We all have excuses about why we aren’t saving for retirement — we don’t make enough money, it’s too complicated, we have too much debt to pay off first.

But the variety of retirement plans out there and automated options actually make it easier to save than ever. If you’re working, here are the retirement options you should look into:

If you have a employee-sponsored retirement plan: Join it. Immediately. Usually in the form of 401(k)s, these retirement accounts mean that your boss will match any contributions you make — usually up to 6 percent or so of your pay — at around 50 percent. But some companies pay more. Regardless, that’s free retirement money you can either grab or throw away.

If you want a retirement plan that grows quickly: Sign up for a Roth IRA. Ah, the beauty of compounding interest: If a 25-year-old invests $5,000 a year in a Roth IRA with an average annual rate of 8 percent, she’ll have $1.4 million to retire with once she turns 65. Compare that to the $1 million she would save otherwise in a regular savings account.

If you’d rather have tax breaks now than in retirement: Open a traditional IRA. Any contributions you make, up to $5,500 per year, are tax-deductible on both state and federal tax returns.

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