Analysis of MyRA Account
Good? Bad? I’m the Guy with the Gun!

Recently POTUS signed an executive order creating the MyRA Retirement Account.

It acts like a Roth Account, with a maximum value of $15,000, and a maximum income eligibility limit of $191,000 per household.

It makes sense to create another option for individuals saving for retirement. We don’t have enough retirement options for individuals/small business owners right now:

  • Individual Retirement Arrangement (IRA)
  • Roth IRA
  • SIMPLE (Savings Incentive Match Plan for Employees) IRA
  • SEP (Simplified Employee Pension) IRA
  • Solo 401k

[/sarcasm].

If you’re interested in the eligibility and deferral limits for each of these plans, they can be found here.

So now there’s the MyRA, which appears to be a single-investment option Roth IRA operated by the Government.

GubMints Analysis:

 MyRA is Good:

  • The one-and-only investment option will be a mock-up of the TSP ‘G’ Fund.
    • As I’ve mentioned here before, the G Fund is the best bond fund on the planet, as it takes long-term government bonds (which have a higher interest rate than short term bonds), waves a magic wand, and turns them in to a money market fund (like a checking account).
  • Just like a Roth IRA, you can withdraw your CONTRIBUTIONS (not EARNINGS) at any time without taxes or penalty.
  • Money can be rolled-out to a privately held Roth IRA at any time.

 MyRA is Bad:

  • The one-and-only investment option will be a mock-up of the TSP ‘G’ Fund.
  • Once your account balance reaches $15,000 (or 30 Years of tenure), the account must be rolled in to a privately held Roth IRA.
    • This means it would be difficult to keep 1 or more years’ worth of cash/money-market-fund invested in the MyRA ‘G’ Fund.

Impact to Feds:

Probably none, unless Congress changes the FRTIB (Thrift Savings Plan) Charter to support the administrative costs of running MyRA’s ‘Mock’ G-Fund.

 Why did POTUS do this?

Based on the myriad of retirement savings options already available- even for individuals- I’m not sure. But a cynic would see two motives:

1) Since these accounts are aimed at low-income-earners, convincing them to invest in Roth-like accounts through payroll deductions (the MyRA) extracts tax revenue from low-income-earners now, rather than later (as would be the case if they chose IRAs or any of the other individual retirement options listed above).

2) The G fund invests excessively in long-term Government securities. This could be an attempt to find more buyers for our national debt. If my math is correct, 150 million income tax filers purchasing $15,000 each in long-term Government debt would be $2.25 Trillion in new government bondholders (This is only a drop in the bucket).

 

How anyone could use a MyRA to their advantage:

1) If you ever work for an employer who offers MyRA, and assuming the MyRA allows Rollovers/Roll-Ins of existing Roth IRA monies (confirmation is not yet available at the time of this post), You and your spouse could each purchase or roll-in as much as a total of $30k ($15k each) in to MyRA accounts, and use the ‘Mock G-Fund’ as your short-term money market fund.

2) Also assuming Rollovers/Roll-Ins from Roth IRA monies are permitted, you could use the MyRA as a ‘Black Swan Event’ stash of cash, where you could use the MyRA to hoard some cash (at a very respectable rate of return for a money market fund) and roll money out in to a Roth IRA if you see a buying opportunity somewhere.

Overall, it’s not a bad idea to encourage workers to save. Less than 7 in 10 Americans are covered by an employer’s retirement plan, so you have to give POTUS credit for making an effort.

Oh, and here’s a hilarious story about day traders trying to make a quick buck purchasing penny stock in a casino company with the ticker symbol ‘MYRA’ immediately following the POTUS speech. 

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