A. myRA has some similarities with Roth IRA, but also some significant differences.
Similarities between myRA and Roth IRA
- Both are subject to the same income limit: $129K for individuals and $191K for couples
- Both are after-tax contribution
- Both earnings enjoy tax-free growth
- Both can withdrew contributions tax-free at any time, but earnings will be taxed before age 59.5
- Both plans are portable, but - Roth IRA is not set up through payroll deduction, myRA is through payroll deduction, but you can change jobs and still contribution to an existing myRA account
Differences between myRA and Roth IRA
- myRA is set up through your payroll deduction, Roth IRA is set up on your own at any brokerage firm.
- myRA only has 1 investment option - the same as federal employees in the Thrift Savings Plan Government Securities Investment Fund earn, its principal is protected, but return is in low single digits; Roth IRA's investment choice could be anything, and depending on your investment choices, it could have huge upside or substantial loss.
- myRA's overall contribution is very limited - once myRA balance reaches $15,000, it will be rolled over to a private Roth IRA. Roth IRA has annual contribution of $5,500 per person in 2014.
The Bottom Line
If you are a middle class and already regularly contribute to your 401K, chances are myRA is not for you. But as we discussed in an early blog post, myRA could be a good place to park emergency fund.