The new MyRA accounts. Anyone planning to use it?

[Left]

Just wondering if anyone will use one if they can? Interest rates are about same as money market/cd but what's interesting to me is rolling it into roth ira.

say i can put $15000 into myra and $5500 into a roth ira each year. But then roll the myra over, i can put $20500 into a roth each year. If this works like this anyways...

[Another Reader]

That's not how it works.  The MyRA essentially is a Roth.  The total annual limit for all Roths is $5,500 if you are under 50, $6,500 if you are over 50.  In addition, the MyRA will only be offered through employers and offering it is voluntary.  If your employer does not participate, you are out of luck.  The maximum total is $15,500, at which point it must be transferred into a private Roth IRA.

Not sure if the limits on income for contributing (AGI) are more favorable.  I have lost track of the phase outs since I retired.

[ch12]

So, I'm reviving this thread because I read a little more about myRA. Obama just signed an Executive Order authorizing the $10.10 minimum wage for federal contractors, and he has a whole list of things in his Year of Action.

http://www.whitehouse.gov/year-of-action?thanks=1&sid=37460581

Something he's folding into the myRA initiative:

Removing Inefficient Retirement Tax Breaks for the Wealthiest While Improving Them for the Middle Class.  The Auto-IRA will spread the tax benefits for retirement savings to millions more middle-class Americans.  Current retirement tax subsidies disproportionately benefit higher-income households, many of whom would have saved with or without incentives. An estimated two-thirds of tax benefits for retirement saving go to the top 20% of earners, with one-third going to the top 5 percent of earners. Our tax incentives for retirement can be designed more efficiently.   According to one 2012 study, additional tax expenditures are a comparatively inefficient way to generate additional saving. The President has proposed to limit the benefits of tax breaks, including retirement tax preferences, for high income households to a maximum of 28 percent.  The President has also proposed to limit contributions to tax-preferred savings accounts once balances are about $3.2 million, large enough to fund a reasonable pension in retirement.

Source: http://www.whitehouse.gov/the-press-office/2014/01/29/fact-sheet-opportunity-all-securing-dignified-retirement-all-americans
I think that the change is worth a discussion in the MMM forums.

[hoppy08520]

I'm not that excited about myRA. This is essentially just a new type of bond (equivalent to the G Fund in the Thrift Savings Plan) offering that you can only buy in a Roth IRA. As one of the other responders wrote, this does not increase the amount of your tax-advantaged space.

And I read one provocative but true post saying that promoting the myRA to low-income people is actually encouraging regressive taxation! This is true for some people. If you're a low-income person in the 10% or 15% Federal tax bracket, then you're likely to be in an even lower income in retirement. People in this profile are probably better off making deductible Traditional IRA contributions instead of what are essentially post-tax Roth IRA (or myRA) contributions.

Regarding some type of wealth/income ceiling for tax-advantaged accounts: in principle I'm for it. I'm not sure what the exact details ought to be.

Let's start with the following premise: we have an income tax because we need to fund our country's government. If you make income, you pay taxes on it. We also have baked some progressive tilts to our tax code. But we also want to encourage people to save for retirement, so we give you some breaks if you do so. There is also some progressive tilts for the tax benefits given to retirement savings, and I think that's appropriate.

Why should a hedge fund manager like Mitt Romney be subsidized (avoid taxes) when he can game the system by injecting insider stock shares in his 401(k) to the point that he has a $100,000,000+ IRA? Why should we subsidize that?

Many tax credits have income phaseouts. Take the child tax credit which is a $1,000 tax credit per child. It's phased out for a married couple filing jointly between around $110,000 - $130,000. While I have mixed feelings about adding complexity to the tax code with these sorts of credits, I do agree with the income phase-out. Why should a billionaire get a tax credit for their children?

Over the last 30 or so years, at least in the US, so much wealth and income have shifted to the extreme upper class, and there are many reasons for it. The wealthy have so many advantages already and I don't see why we should subsidize them even more with tax-advantaged retirement accounts when they are already doing just fine.

[sheepstache]

I could see this being good for my spouse.  I keep trying to get him to open an IRA, but there's a. the risk of losing money, b. the minimum investments for a lot of funds, c. the choice of what to invest in, and d. 'but there's money! in my checking account!  have to spend it, weeee!!"  So this elides all of that by keeping it simple and withdrawing directly from his paycheck.