Based on reader emails, it appears that there’s still a lot of confusion about myRAs.
As far as I can tell, the primary source of this confusion is the fact that many media sources are reporting that myRAs are a new type of retirement account that is “similar to a Roth IRA.” At least from a tax perspective, this is not true. From a tax perspective, they’re not a new type of retirement account. Nor are they “similar to” a Roth IRA.
MyRAs are Roth IRAs.
Here it is in the Treasury’s own words:
“The [myRA] retirement savings account will be a Roth IRA account and have the same tax treatment and follow the rules of Roth IRAs.”
This distinction is important because it helps to answer many of the questions that people are asking about these accounts. For instance, for a given tax year, no, a single person cannot contribute $5,500 to a myRA and $5,500 to an IRA elsewhere.
So what’s newsworthy about the myRA?
There are some reasons why the TreasuryDirect “myRA” Roth IRA is newsworthy. Specifically:
- These Roth IRAs will offer access to an investment option previously available only to federal employees — the Thrift Savings Plan G Fund (and this is in fact the only thing that you can own in these accounts),
- Once a “myRA” Roth IRA reaches $15,000 or has been open for 30 years, you must roll it into an account elsewhere (e.g., a Roth IRA at your brokerage firm of choice), and
- Employers will be able to make direct contributions to these Roth IRAs on behalf of employees.
But, from a tax perspective, these are just plain-old Roth IRAs.