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By Michael T. Lahti
As reported in TaxNotes , taxpayers can now contribute all or part of their federal income tax refunds to a new tax-free myRA retirement savings vehicle that the Treasury Department officially rolled out November 4. "What makes myRA special is that it reduces many of the common barriers to saving that are an obstacle for many people to get started," Treasury Secretary Jacob Lew told reporters during a conference call.
Earners can now also transfer funds from their bank accounts on a one-time or recurring basis into their new myRA accounts, which were launched nationally after an almost yearlong pilot program, Lew said. "You don't have to worry about fees or minimum requirements, you don't have to worry about investment options, you don't have to worry about losing money, and if there's an emergency, you can have access to the money you put away at any time," Lew said.
Treasury officials also said that qualified earners may one day be able to contribute to myRA accounts by check.
MyRA accounts are meant to accumulate small quantities of savings, the interest on which is tax free, to a level up to $15,000 (or 30 years of contributions, whichever comes first), which can then be transferred to a private sector Roth IRA, Lew and Treasury officials said.
MyRA accounts were first proposed by President Obama in January 2014 during his State of the Union address. In a November 4 statement, Treasury noted that a 2015 Federal Reserve report found that 31 percent of non-retired Americans have no pension or retirement savings.
The pilot program originally used direct deposit through workers' employers, though the new features will allow any individual to set up an account and contribute directly from their bank accounts or tax refund. Only one myRA account may be opened per person.
MyRAs follow the same eligibility requirements as traditional Roth IRAs, according to the Treasury statement. Savers, or their spouses if married filing jointly, must have taxable compensation and be within Roth IRA income guidelines to participate. Account holders may contribute anywhere from a few dollars up to $5,500 a year, or up to $6,500 a year for individuals who will be 50 or older at the end of the year. Contributions are after taxes. Savers can withdraw money at any time, tax free, without penalty. Roth IRA requirements apply to tax-free savings withdrawals.
Upon reaching the $15,000 or 30-year threshold, savers will be contacted by Dallas-based Comerica Bank, which managed the myRA pilot program, to arrange transfer of the funds to a private sector Roth IRA. Comerica did not respond to a request for comment. "This is a start, not a finish," Lew said. "People will never build up the kind of retirement savings they need if they don't get started."