MyRA Savings Accounts Explained – No Downside, but Limited Benefit for Expats
In this year’s State of the Union address, President Obama announced that he would sign an executive order that creates the MyRA savings program. The main aim of the program is to offer retirement accounts for employees who work for companies that don’t offer a retirement savings vehicle. MyRA accounts will be backed by something similar to a savings bond, and account holders will be guaranteed that they will pay no fees and that the value of their account will not decrease below their principle.
MyRA Criteria – Expats Take Note
With as little as $25 to begin, and contributions as little as $5, anybody who meets the criteria for a MyRA account can open one of their own. And as expats, you might be wondering just what those criteria are. Let’s take a look at some of those criteria:
– You must work for a U.S. employer and be paid on a U.S. payroll.
– Your employer must not offer a 401(k) or any other similar retirement savings program.
– Your employer must choose to participate in the MyRA program as soon as late this year (2014)
– You must earn less than $191,000 USD per year
– You must choose to allocate your MyRA savings to U.S. government bonds
Here’s a brief YouTube video from the State of the Union address that describes the MyRA program:
Based on the criteria above, it’s difficult to imagine that many expats will meet the necessary criteria for the program. They’re tough qualifications for those living overseas in retirement or other leisure.
If You Qualify as a U.S. Expat for the MyRA Program
On the off chance that, as a U.S. expat, you do qualify for the MyRA program, there are some benefits and drawbacks. If your adjusted gross income is $30,000 (individual) or $60,000 (married) you may be eligible for a credit of between 10% and 50% (based on income). It’s a sort of “match” courtesy of Uncle Sam. Another plus is that there are no fees to the account – something that most people who qualify for a MyRA account will appreciate.
On the downside, there’s no way to invest in higher risk/reward securities meaning your returns aren’t likely to be that great. But for some, this still may be a decent option. The Treasury invests your MyRA funds into the same bonds enjoyed by U.S. federal employees – which never lose principle. The security of never losing your principle is offset by the low yields of the government bonds – currently in the low, single-digit percentages. But, according to some sources, you’ll be able to withdraw money at any time without penalty (unlike other savings instruments like Roth IRAs) which could, in fact, make the MyRA program a winner for socking away some money for a down payment on a home or some other big-ticket item such as a car, etc.
It’s fair to assume that expats seeing any benefit from the MyRA program would be “accidental” at best. It’s clear this executive order was not initiated with U.S. expats in mind, but as one piece of a broad solution to give people a retirement vehicle that’s low cost, low risk and, as we’ve noted, low-return.
Perhaps one day the federal government will offer a real solution for expats that encourages them to invest back into America from abroad instead of forcing those who live outside the U.S. to participate in local investment and savings vehicles that may not serve as well as a bona fide “made in America” program.
Einat Mazafi is the owner of NY International Shipping, an International Shipping and moving company based in New York. She is also a specialist in providing the best relocation solutions to clients worldwide.