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Treasury closes myRA program

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in Small Business Tax

Don’t count on a myRA for future retirement savings.

Alert: Citing rising costs, the Treasury Department has announced that it is shutting down the myRA program. Participants will be receiving instructions on how to wrap things up.

According to the Treasury, the myRA program has cost taxpayers $70 million, with expectations it would take $10 million annually to run it going forward.

The myRA was designed to resemble its close cousin, the Roth IRA. As with the other IRAs, a myRA participant was able to contribute after-tax funds up to the annual threshold of $5,500 ($6,500 if you’re age 50 or over). An initial myRA deposit could be as little as $25.

The contributions grew inside the account without any current tax erosion. As with a Roth in existence at least five years, qualified distributions were exempt from tax. Conversely, payouts of earnings before age 59½ were treated as taxable distributions, plus a 10% penalty tax applied. Like Roth IRAs, myRA participants didn’t have to comply with rules requiring lifetime distributions after age 70½.    

Unlike a Roth IRA, however, there was only one investment option: a U.S. Treasury bond offering the same variable interest-rate return as the one offered to federal employees through the Thrift Savings Plan Government Securities Investment Fund. So investors were granted more peace of mind than usual, but the rate of return could pale when compared with other investments.

The same limits on availability that apply to the Roth IRA were also effective for myRAs. This eliminated the myRA as a retirement savings option for many upper-income taxpayers.

Finally, once the account balance reached the magic $15,000 mark, you were required to roll over the funds to a Roth IRA—no ifs, ands or buts.

In late July, the Treasury Department sent emails to all myRA participants notifying them of the change. Accounts will remain open until further notice, but those with automatic contributions should stop future transfers.

Tip: More information is available on the myRa website, https://myra.gov.

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