Saving for retirement can be difficult, especially when the cost of living and student loan payments quickly eat up your paycheck. However, the U.S. Treasury Department is now offering individuals another option to save for retirement, known as the myRA. This retirement savings option allows you to save a small portion of your paycheck overtime, while enjoying the tax benefits of saving on an annual basis. To determine if you qualify, consult with your tax professional or accountant, such as Allen J. Rolnick in Forest Hills, NY. So what do you need to know about this newest savings tool?
Benefits of a myRA
The primary benefit for a taxpayer is that you pay no fees to start this savings account and there are no maintenance fees to keep it open. You set the minimum amount you want to add each week and set up the automatic withdrawals from your account into your myRA.
There are also no worries about managing your investments. This is a simple savings account, backed by the U.S. Treasury and it collects a set amount of interest, typically the same amount that most government security investments receive. So while it might not have the same highs as some investments, it also won’t have the same lows either. Instead, your income steadily grows.
Your myRA account also qualifies you to enjoy the tax deductions for retirement savings and depending on your income, you may also qualify for the Saver’s Tax Credit. These can combine to provide a reduction in your tax bill overtime.
This type of account offers you the ability to keep it regardless of job changes or other life changes. It is considered similar to a Roth account, so you also enjoy the benefits of tax free distributions. If your current employer does not offer a retirement savings option, then this gives you a cost effective option to start your own.
Opening an myRA
To take advantage of the myRA, you will need to provide your social security number, a driver’s license or state ID and the name and social security number of a beneficiary. Other proof of citizenship can be a passport or driver’s license. Once you have these pieces of information, you can begin the process of setting up your new myRA savings account.
Funding your new myRA account can be as simple as having your employer take it out of your paycheck and put it right into your savings. This can be done by completing a direct deposit form and giving it to your employer’s human resources department. However, you do want to check with your employer to confirm that they have no additional processes for you to complete.
Another option is to use your own checking or savings account to complete the transaction. You can also set up an regular automatic withdrawal from your savings account based on your pay periods. Once set up, you can determine how much your budget can handle and make your deposit accordingly. Deposits can be set up to reoccurring or just an annual deposit.
By paying yourself first, you are providing for your future retirement in a secure fashion that will cinque to grow during the years that follow. There are limits on how much you can contribute during the year, but those may change to account for cost of living throughout the remaining years.
Options for Your myRA
Once your savings account is started, you can enjoy the tax benefits of saving for retirement. Additionally, you have the option of turning the savings account into a traditional Roth account at a later time to increase the amount of savings. However, you do not need do anything to the savings account once started, if that is your wish.
There will also be the need to roll the myRA over into a private Roth IRA when the balance reaches $15,000 or 30 years. Therefore, you will need to plan ahead regarding this transfer. However, you can choose to transfer it at any time. The benefit of a traditional private Roth account is that you have more investing options to assist in growing your retirement fund.
By considering a myRA account, you have multiple options to start the saving process for your retirement plans.
Click on the link below to contact a tax professional in the office of Allen J. Rolnick in Forest Hills, NY, who can assist you in determining the tax benefits of an myRA for your personal circumstances.
