For many clients, their tax return preparer is the only person that they turn to during the year for financial advice. As tax professionals, many of us are called to guide our clients in the right direction, not only when it comes to paying their fair share of taxes, but also when it comes to helping them save for their future.
According to a 2015 Federal Reserve Report, 31 percent of non-retired people said they have no retirement savings or pension of any kind. In response, the U.S. Department of Treasury has developed myRA, a Roth IRA for individuals who don’t have access to a retirement savings plan at work or who lack other options to save.
This category may not fit many of your clients, but tax season is a great opportunity to educate clients who do fall into this category on how to build assets and start saving for retirement. So, as you make your way through the last weeks of tax season, consider sharing information on myRA with them. Here’s a look at the basics.
What is myRA?
myRA is a Roth IRA that was developed for people who don’t have access to a retirement savings plan at work or lack other options to save. This may include small business employees, part-time and temporary workers, and the self-employed.
It costs nothing to open a myRA account. There are no fees, no minimum contributions, and myRA carries no risk of losing money. The investment is backed by the U.S. Treasury.
Who is eligible?
myRA could be a good fit for people who:
• Don’t have access to a retirement savings plan at work or lack other options to save
• Want to save but haven’t found an easy way to get started
• Earn an annual income below $131,000 if single, or $193,000, if married filing jointly
How does it work?
Savers choose the amount to contribute to their myRA, up to $5,500 per year or $6,500 per year for individuals who will be 50 years of age or older at the end of the year. The account safely earns interest at the same variable rate as investments in the Government Securities Fund for federal employees, which returned 2.31 percent in 2014 and has had an average annual return of 3.19 percent over the ten-year period ending December 2014.
Savers can withdraw the money they put in without tax and penalty and can withdraw interest earned without tax and penalty under certain conditions—and they can choose to transfer or roll over their account balance into a private-sector Roth IRA at any time.
myRA accounts can have a maximum balance of $15,000 or a lower balance for up to 30 years. When either of these limits is reached, the money is transferred to a private sector Roth IRA where savers have other opportunities to invest and grow their savings.
I have a client who is interested. Where do they start?
1. Open a myRA account at myRA.gov or by calling 855-406-6972
2. Fund the account from a paycheck, checking or savings account, or federal tax refund
3. Access the account online to view savings and to manage it.
Resources to educate your clients
The U.S. Department of Treasury put together a myRA promotional toolkit for tax preparers and professionals. In it, you’ll find pre-packaged blog posts for your social media channels, web banners for your website, articles for your client newsletters, email blasts, posters and more.
So, take some time this tax season to educate your clients on the importance of saving for their future and why a starter savings plan, like myRA, is not only a great way to get accustomed to a regular savings pattern, but to begin to build the investment they’ll need for retirement.