If you’re not covered by a workplace retirement plan, consider looking into the new simplified Roth IRA, called a myRA (short for “my retirement account”). The account is funded by setting up direct paycheck deposits. Your employer must be able to direct your deposits to your account but otherwise incurs no administrative burden or costs.
The contributions to your myRA are invested in government-guaranteed Treasury securities. The principal can’t decrease, and interest accrued at the same rate as the federal employees’ retirement program fund. That fund achieved an average annual return of 3.39% between December 2003 and December 2013.
A myRA is not associated with any employer and belongs entirely to the employee. It can be moved to any new employer that offers direct deposit capability. Other deposit options are not yet available but are anticipated for the future. Workers with multiple jobs can set up a myRA with each employer.
The Roth IRA annual contribution limits ($5,500 for 2015, or $6,500 if you’ve reached age 50) apply to total myRAs owned. You must have taxable compensation, which in 2015 cannot exceed $131,000 for unmarried individuals and $193,000 for married couples filing jointly.
A myRA account may not contain a balance over $15,000 and may not be held more than 30 years. When either limit is reached, the savings must be rolled over into a standard private sector Roth IRA. Since contributions are made from after-tax earnings, the principal may be withdrawn at any time without tax or penalty. Interest within the account will accumulate without being taxed, but with certain limited exceptions it will be taxable if withdrawn before you reach age 59-1/2.
MyRAs are new and not yet widely available, though the accounts are expected to become increasingly accessible over time. If you’d like to learn more, consult your tax professional.