Say Goodbye to MyRA, Hello to Roth IRA
The government may be shutting down its investment program, but don’t let that stop you from saving for retirement. There are lots of tax-friendly Roth IRA possibilities, even for those with just $50 a month to spare.


Fewer than 31% of Americans own an IRA, and even fewer (19%) actively contribute to one. In addition, only 5% of Americans take full advantage of this savings tool by contributing more than $5,000 a year to IRAs, according to a 2017 report from TIAA.
Yet some folks who want to save for retirement are losing one way to do it, the myRA.
The U.S. Department of the Treasury announced in late July that it is ending the Obama administration’s myRA program, a no-fee way to save for retirement designed for people without access to employer-sponsored retirement plans like 401(k)s. The reason? It was found not to be cost effective, according to the press release.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The program was launched about two years ago, targeting lower-income savers, although myRAs were available to those with incomes reaching into the six figures as well. The accounts came with no minimum deposits. According to the Treasury Department, demand for and investment in the myRA program has been extremely low. American taxpayers have paid nearly $70 million to manage the program since 2014.
The myRA website has been updated to walk consumers through the process of selecting a new Roth IRA provider and moving the funds.
How can people with modest means still invest for retirement now that myRA is closing up shop?
What NOT to do
First off, if you are in the myRA program, avoid the temptation to just cash your money out of the account. That could result in taxes and an early-withdrawal penalty if you’re under age 59½.
Instead, set up a Roth IRA with another provider
The Treasury website outlines a two-step process for you to transfer your account balance to another Roth IRA and offers tips on what to consider when selecting a provider. But even if you don’t have a myRA, you can open a Roth IRA on your own with as little as $50 per month with such mutual fund companies as Vanguard, Fidelity and American Funds. You can select a target date fund, balanced fund or an asset allocation fund that aligns with your risk tolerance. One example is the Vanguard LifeStrategy Fund.
Be careful how you move the funds
To avoid triggering possible taxes or penalties when moving money from your myRA to a new account, you need to proceed with caution. Before initiating a direct rollover or transfer, open a new Roth IRA with a different provider where you will continue to save and invest. Then, by working with the new Roth IRA provider you select, you can transfer your myRA balance to your new Roth IRA. If you don’t perform a direct transfer, be sure to redeposit the full amount into a new Roth IRA within 60 days to avoid any taxes or penalty.
Whatever you do, don’t quit saving
It is difficult for people who make lower wages to think about saving for retirement, but it’s something we all need to do. Look at what you bring in per month, add up your expenses and think of ways to cut some corners. Do you have subscriptions to magazines or cable you don't really use? It is the perfect time to get rid of some of those unnecessary expenses. Then, set up a budget to help you keep on track. Not only does a budget help with saving for retirement, but it also makes monitoring income and expenses easier.
Make your savings automatic
The next step is to directly deposit a set amount of money into a 401(k) or IRA per pay period. By automatically depositing funds, you don't have to worry about putting money into the portfolio each month. You can sit back and watch your retirement savings grow. Money in Roth IRAs grows tax-free. A few other basics to keep in mind with Roth IRAs:
- The annual maximum amount you can save for 2017 is $5,500, or $6,500 if you're age 50 or older.
- Contributions cannot exceed your earned income.
- You can withdraw your contributions — but not your earnings — at any time, regardless of your age, without paying taxes or a penalty (as long as you’ve held the account for five years).
- When you reach age 59½, all withdrawals are tax-free (as long as you’ve held the account for five years).
- Income limits apply to contributions. For single filers in 2017, your ability to contribute starts phasing out at $118,000, and for married people filing jointly, it starts phasing out at $186,000.
The bottom line
There are many reasons why people are not saving for retirement. Younger individuals may not think it is important at the present moment. People tend to prioritize buying a house or paying down debt. To them, retirement is a distant future event. Another reason is people may intend on relying on their Social Security benefit. The average monthly Social Security retirement benefit for January 2017 is $1,360. That doesn't go very far.
For families of modest means, saving for retirement is not out of reach. Simple saving techniques can help make your goal of peaceful twilight years a reality.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Marguerita M. Cheng is the Chief Executive Officer at Blue Ocean Global Wealth. She is a CFP® professional, a Chartered Retirement Planning Counselor℠ and a Retirement Income Certified Professional. She helps educate the public, policymakers and media about the benefits of competent, ethical financial planning.
-
Aging: The Overlooked Risk Factor
Sponsored Elder care is a personal and financial vulnerability many people fail to plan for.
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?
AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the Fairway
Think of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty Moves
If you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
You Were Planning to Retire This Year: Should You Go Ahead?
If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care Solution
If you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a Recession
Recessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income Planning
Once you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.