New U.S. Treasury Retirement Account:Top Questions and Answers
2. When will people be able to sign up for the new account?
3. How will people be able to sign up for the new account?
4. Who will be able to sign up for this new account?
5. What will be the benefits of these accounts when they become available?
6. Will all employers offer the account?
7. What about people who move to a new job or need to work more than one job?
8. Is this meant to replace employer 401(k) plans?
9. Where can people find more information?
The U.S. Department of the Treasury (Treasury) will offer a new retirement account designed to help people looking for a simple, safe and affordable way to save for the future. This new Treasury savings option will have no fees, will never go down in value, and will offer a low opening amount – just $25. Savers will be able to add as little as $5 to the account every payday. It is designed for people who don't have a retirement savings plan through their employer or for those who want to supplement an existing plan.
Treasury anticipates the new retirement account will be available mid-to-late 2014.
Initially, the account will be offered to savers through a familiar and trusted process – automatic payroll deduction. This will allow savers to "set it and forget it." Treasury plans to add other electronic contribution methods in the future, including mobile payments.
This account will offer people a simple, safe, affordable way to save for the future. It will be open to savers with an annual income below $127,000 (individual taxpayers) or $188,000 (joint taxpayers). These income limits may change slightly each year based on cost-of-living adjustments (COLA). It will have the same tax advantages as common retirement accounts known as Roth IRAs. This account is not limited to one employer, so savers with multiple jobs can contribute through each paycheck.
As with all Treasury securities, this savings option will be backed by the Treasury. The principal is guaranteed, which means the account will never go down in value. Additional features will include:
- Only $25 to open an account
- Invest as little as $5 every payday
- No fees
- Savings will earn interest at the same variable rate as low-risk retirement accounts offered to government employees
- The account will be portable – so it is not tied to a single employer
- Earnings are tax free unless withdrawn before the saver is 59½ or the account has been open for less than five years
- Account holders can build savings for 30 years or until account reaches $15,000, whichever comes first (balance will then rollover to a private-sector retirement account provider of the save's choosing)
Treasury research shows that many employers may be interested in offering the account to employees for at least two reasons: 1) it will be a benefit that can help them attract and retain employees, and 2) the account will offer an easy way to help their staff improve their financial stability by saving for retirement.
The account is portable and not limited to one employer. Savers who move jobs can continue adding savings to the same account. And savers with multiple jobs can tap every paycheck for payroll deduction to add to their savings account.
The new retirement account is not meant to replace employer 401(k) plans. The account may be most helpful for new savers who don't have access to a retirement savings plan through their employer. Research also indicates that people who have access to 401(k) plans may find the new retirement account to be a useful supplement.
For more information, visit www.treasurydirect.gov/readysavegrow or call 844-284-2676 (toll free).