I just opened a myRA because of Obama’s State of the Union address — not the one that just happened, but last year’s.
On Jan. 28, 2014, Obama announced “a new way for working Americans to start their own retirement savings.” He called it myRA and promised…
It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in.
Of course, because this is the federal government, the Treasury department only rolled out the program last month — and nobody is talking about it anymore, including the president. During this year’s State of the Union, Obama only said “retirement” twice, with no mention of myRAs.
As a 23-year-old writer with no retirement savings at all, I decided to sign up and found out it was amazingly simple and cheap — it cost $25 (which is saved in the account), and took an hour. Here’s how easy it was, and how you should decide whether or not it’s right for you…
How do you get a myRA?
1. Go online to myRA.treasury.gov. It’ll ask you for your personal information, including your Social Security number and driver’s license number.
2. List your beneficiaries. That’s who you want to get your money if you die. I listed my brother and my best friend.
3. Provide your security information. The government asks you to provide a “secret word” and a “hint” and your “mother’s maiden name.” Because apparently that’s all you need to be secure.
5. Confirm your identity. The federal government asked me five questions to prove who I was. They actually took me a minute to remember the answers — one asked me what year model my car was, and one asked me the county where I got my driver’s license.
6. Pick a myRA savings goal. Mine was $10. Then they’ll give you your account information, a routing number and a myRA number.
7. Print two copies of the direct deposit form. One for you and one for you employer.
8. Give your direct deposit form to your HR department. Mine didn’t have a problem processing my form — as long as your employer has direct deposit, you can get a myRA account. I was told it takes two weeks for them to process your information, and your initial deposit has to be $25.
Your money will be automatically deducted from each paycheck put into an interest-earning account that is backed by the Treasury and will continue to grow until you’re ready to withdraw it, tax-free.
Why should I get a myRA?
If you, like me, are a millennial with little knowledge about how to save for retirement, consider a myRA. When I got my first job, my first day at work consisted of a long visit to human resources and complicated questions about whether I want to set up a 401(k) and what PTO means and what kind of health insurance I should get.
Like most other 22-year-olds, I had a vague idea what 401(k) meant. But it wasn’t until I started my job as a financial news reporter that I realized how important a retirement savings plan actually is.
Think about it: No millennial is going to get a pension. You may not have access to an employer-sponsored 401(k). You have student loans to worry about paying off. And so your retirement knowledge is probably equal to your retirement savings: zero.
We’ve written before about different types of retirement accounts, including the myRA plan. But if you’re just starting out in the workforce, you’re a low-income or part-time worker, or your employer doesn’t offer a 401(k) until you’ve been working there a while, you should open a myRA — it’s the simplest and cheapest place to get started.
Why shouldn’t I get a myRA?
If you’re already invested in another retirement plan, you don’t need a myRA. This is for newbies.
After the myRA plan was announced, Obama faced plenty of criticism from news outlets across the board, many of whom said he wasn’t doing enough to help aid retirement.
That might be true. In fact, when I used the myRA calculator to see how much I’ll save by contributing $20 a month for 30 years, the answer was kind of depressing: only $10,730. That might be enough to scrape by a year in retirement, if that.
But the point isn’t that a myRA is going to somehow magically yield enough for you to retire with. In fact, your savings will be invested in Treasury bonds, so while they’ll be safe and you’ll never lose money like you might with other investments, you won’t make much.
Rather, the goal of starting a myRA account is that you’ll begin to practice saving now for retirement. The reasoning is that if you can start small, you’ll be more likely to find other ways to fund your retirement along the way, and you can roll your myRA money over there when you’re ready. Once your savings hit $15,000, your myRA money has to be transferred into a private-sector Roth IRA.
So far I’ve got $25 in my account — not much, but it’s a lot more than most people my age have saved.