MyRA paid from money you have left after taxes

President Obama announced a new kind of retirement plan called MyRA.

It won’t do much to reduce your income taxes because the contributions to this new retirement savings plan are NOT deductible on your tax return. It is your account, and you keep it if you change jobs.

The accounts for this plan will be funded or paid with what wages are left after payroll deductions. It is paid from what you have left after taxes.

The MyRA plan is similar to a ROTH IRA, but the earnings will be what short-term U.S. Treasuries are paying, which is not very much currently. However it will only be invested in government savings bonds, so the risk of loss is very low.

There will be a minimum amount to open an account, $25. After that, the contribution per pay period can be as low as $5. The maximum contribution in a calendar year is $5,500 (like the ROTH IRA).

There will not be any matching contributions by employers. And the employers are not to charge any administration fees or costs.

You can draw out of the MyRA at any time, but if you do so before being age 59½, there will be tax on the earnings and possibly a small penalty for “early withdrawal.”

When the MyRA account has $15,000, it will be rolled over into a ROTH IRA, with no tax to pay because the money was “after taxes” in the first place. But why not invest directly with $50 or $100 a month with the funds that will work with you?

The MyRA pilot program is to start later this year with it being available nationwide in 2015. I’ll be surprised if this plan is a success.

It is good to start saving. The savings habit is valuable. However, this may not save much for you. Maybe a different savings plan will be better for you. For example, if you work for an employer that offers a matching contribution, be sure to contribute enough to the 401(k) to get the full matching payment from the employer. That is sort of like “found money.”

Saving in regular or ROTH IRAs, at work with 401(k) or similar retirement plans can give a tax credit if your gross income is not too high. The credit is available for folks 18 or older whose gross income is not more than $30,000 for single taxpayers or $60,000 for married people filing jointly. The maximum annual credit is $1,000 for singles and $2,000 for couples. You must put money in a retirement plan to get this credit.

It is good to save, but investing only in bonds may not be best if we have more inflation.

Did you hear? “If you woke up this morning, it is time to celebrate!” — Joe Takash

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Co. CPAs.