Fingers climbing money steps © iStock

You say you don’t earn much? You have only a few bucks stashed? You’d like to put that money toward retirement? You have no employer-provided 401(k) plan to make it easy?

We may have an idea to get you off the dime. And it doesn’t take much more than a dime to get started.

It’s the myRA, a simple, safe, affordable retirement savings account from the U.S. Treasury.

It’s for folks who face hurdles in starting retirement saving.

Pros and cons of a myRA

Pros
  • Can access contributions anytime.
  • Can contribute small amounts.
  • Principal guaranteed by U.S. government.
  • No fees.
Cons
  • Invests in low-yielding bonds.
  • Funds must be transferred at $15,000.
  • Earnings are taxable if withdrawn before age 59 1/2.

The myRA’s chief advantages are that there are no fees charged for the account, and earnings can be withdrawn tax-free after age 59 1/2, says Rob Drury, executive director of the Association of Christian Financial Advisors.

Is the myRA perfect? Far from it. But if you use it as a steppingstone to something better, myRA could be a way for you to make that crucial 1st step.

The low-income cub

The myRA is aimed primarily at early 20-somethings in their first jobs. It’s “very good for someone who has low income and is in, say, the lower one-third of earners in the country,” says Jamie Hopkins, associate director of the retirement income program at The American College in Bryn Mawr, Pennsylvania.

You can start a myRA account with $25 and add money in increments as low as $2. Don’t count on banks turning cartwheels over these amounts.

A type of Roth IRA, the myRA allows access to your contributions, and access without penalty or taxes is crucial for young savers. “They probably don’t have liquid assets, and putting money aside that they have access to gets around the scare factor,” Hopkins says.

The safety-minded starter

If you haven’t started retirement planning and safety is your big concern, the U.S. government-backed myRA will let you sleep soundly.

“The instruments you’re investing in are the same bonds used in the G Fund in the federal Thrift Savings Plan,” Hopkins says.

“It’s a specific government bond made for the myRA. The principal is protected. And while not perfectly protected against inflation, the growth on the G Fund has always outpaced inflation. For someone who is very risk-averse — and millennials are risk-averse — this is a savings program that might have a strong attraction. … Now they have a plan, and it feels safe.”

Regardless of whether you’re the low-income cub or the safety-minded starter, remember this above all about myRA: It’s not designed to replace 401(k)s. You can save only so much — exactly $15,000 — before you must graduate to a traditional or Roth IRA and invest in big-kid asset classes.

MyRA has a return of 1% to 3% per year — what the G Fund delivers. As Hopkins says, “That’s not the kind of return you should be seeking” as you grow your career and portfolio.

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