Understanding MyRA: Features, Eligibility, and Tax Benefits

The MyRA, or My Retirement Account, was a government-backed savings option designed to help individuals without access to employer-sponsored retirement plans. This initiative provided Americans with a simple way to start saving for their future.

Key Features of MyRA Accounts

MyRA accounts were designed for simplicity and accessibility, particularly for individuals new to retirement savings. Structured as a Roth IRA, contributions were made with after-tax dollars. While these contributions were not tax-deductible, qualified withdrawals, including earnings, could be tax-free if certain conditions were met, as outlined in the Internal Revenue Code (IRC) Section 408A.

The investment strategy for MyRA accounts focused on capital preservation, with funds invested in U.S. Treasury securities. This conservative approach ensured a low-risk environment for account holders, with interest rates tied to the Government Securities Investment Fund (G Fund) of the Thrift Savings Plan. This guaranteed principal safety while providing modest returns, appealing to risk-averse savers.

MyRA accounts had no fees for opening or maintaining an account. The minimum initial contribution was $25, with subsequent contributions as low as $5, making it accessible to individuals deterred by high fees or contribution requirements. The accounts were portable, allowing savers to transfer their MyRA balance to a private-sector Roth IRA once the account reached $15,000 or after 30 years. This ensured continued growth beyond the program’s limitations.

Eligibility Criteria for MyRA

The MyRA program targeted individuals without access to employer-sponsored retirement plans. Eligibility adhered to Roth IRA guidelines. In 2023, individuals with a modified adjusted gross income (MAGI) of up to $138,000, or $218,000 for married couples filing jointly, were eligible for full contributions, with phased contribution limits for those with higher MAGIs.

The program was available to U.S. citizens and resident aliens, in line with federal regulations. This focus on residency complied with tax guidelines defined in IRC Section 7701.

There was no minimum age requirement, but account holders needed earned income from employment or self-employment to contribute, consistent with Roth IRA rules. Individuals over 70½ were also eligible to contribute, as Roth IRAs do not impose age limits for contributions.

Contribution and Withdrawal Rules

Contributions to MyRA accounts were made using after-tax income, subject to IRS annual limits. In 2023, individuals under 50 could contribute up to $6,500, while those aged 50 and above could add an extra $1,000 under the catch-up provision.

Withdrawals from MyRA accounts followed Roth IRA principles. Contributions could be withdrawn at any time without taxes or penalties, as they were made with post-tax dollars. However, withdrawing earnings required the account to be open for at least five years and could only be used for specific purposes such as reaching age 59½, a first-time home purchase, or qualifying educational or medical expenses. Early withdrawal of earnings for other purposes incurred a 10% penalty, though exceptions existed for situations like disability or certain medical expenses.

Tax Implications of MyRA

The tax treatment of MyRA accounts offered long-term benefits. Since contributions were made with after-tax dollars, there was no upfront tax deduction, but the potential for tax-free growth on earnings was a significant advantage.

Individuals contributing to a MyRA were required to keep detailed records of their contributions and withdrawals to comply with IRS reporting requirements. Qualified withdrawals of earnings were reported as non-taxable events using IRS Form 1099-R, which documented distributions from pensions, annuities, retirement accounts, and IRAs.