Free Retirement Plans for Startups and Small Businesses
For small businesses not aware of the advantages of myRA, this overview may help.
If your small business or its employees are just starting out, then "myRA" might be the right first step to begin funding that road to retirement for those in the workforce who have not yet begun to save or invest. Of course, the discussion here is not the entire solution but all future retirees need to start somewhere, and sound advice includes choosing the simplest, safest, and most economical means to begin this important journey. Every day delayed is a missed opportunity.
If your small business is growing but cannot yet afford to provide a comprehensive retirement plan for your employees, the myRA direct deposit option is the "no cost" strategy to help your employees begin their journey to funding their retirement.
According to a 2015 Federal Reserve Report, 31% of non-retired folks said they have no retirement savings or pension whatsoever. Furthermore, a 2013 report conducted by the National Institute on Retirement Savings concluded that the average near-retirement household had only $12,000 in retirement savings. Among workers who do not participate in a 401(k) or other defined contribution plan, 42% indicated that it is because their employer does not offer a plan or account. The U.S. Bureau of Labor Statistics recently found that 62% of part-time workers lack access to a retirement plan through their employment.
In response to these disconcerting studies, the U.S. Department of Treasury developed a new plan for those economically-minded folks who may lack access to retirement plans at work so they too can start saving for their future, it's called "myRA" (my Retirement Account).
myRA is more or less a Roth IRA that invests in United States Treasury retirement savings bonds, which is the safest investment available (i.e., it will not lose principal). The account was developed specifically for workers without access to employer-sponsored retirement savings plans as well as for those people looking for a simple, safe, and affordable way to start saving for retirement. myRA accounts cost absolutely nothing to open, have no fees, and require no minimum amount of savings. So no bank fees, no account maintenance fees, no transaction fees, no commissions, and no set-up fees, period. All it takes is a desire to save for retirement and access to a computer.
myRA offers a simple, safe, and affordable way to start saving for retirement, and is a good option for people that have not started saving for retirement because they lack access to a retirement plan through their workplace, are concerned about the complexity of investment options, or simply find the cost of opening and maintaining a retirement plan too expensive.
The U.S. Treasury offers numerous methods of funding a myRA account, including automatic direct deposit and recurring contributions to your myRA from another account, such as your bank or credit union savings or checking account. Taxpayers also have the option to direct all or part of their federal tax refund to their myRA.
Investment options are limited to the United States Treasury savings bond, which safely earns interest at the same variable rate as those investments in the Government Securities Fund for federal employees. These investments earned 2.04% in 2015 and had an average annual return of 2.94% over the ten-year period ending December 31, 2015. Of course, past performance is not a guarantee of current or future performance or return on these accounts.
For one to open and save in a myRA account, the contributor/account holder must have "earned income," (generally domestic salary or wages). In addition, the account holder's modified adjusted gross income cannot exceed applicable limits. For 2016, one would be eligible to contribute to a myRA if they have an annual earned income below $132,000 if single, head of household, or married filing separately; or $194,000 if married filing jointly. These earned income limitations can change in future years, similarly to other retirement account contribution limitations.
Setting up an account is simple. For online account access, simply go to myRA.gov to get started. If your small business does not currently offer a retirement plan, the myRA direct deposit would be a NO cost way to get your employees started while your company grows.
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Donald Katz, PLLC
Email address: firstname.lastname@example.org