First, it is not the name of your big sister’s friend. It is the newest IRA account out there.
It was announced in 2014 by President Obama in a State of the Union speech. It is designed to give people a chance to start saving for their future.
The myRA is a retirement plan created by the Department of the Treasury. It has no costs, fees, complicated investments or the risk of losing money.
Some of the facts about the myRA are that it is a no cost/fee retirement account that is opened through the Department of the Treasury. The monies are invested in government securities which have earned 2.94% over the last 10 year period. In August of 2016, it will earn 1.50%.
It has the same requirements as a Roth IRA. You can contribute up to $5000 a year and if you are over 50 up to $6500. It is after tax money so there will be no deductions come tax time. The contributions are not tax-deductible and will not be taxed upon withdrawal, just like a Roth IRA.
With the myRA, you can set up automatic contributions in which you can invest as little as $5 a paycheck. This gives you the flexibility to set aside an am0unt that will work with your budget.
You can also make one-time contribution lump sum like a tax return or form a savings account. Also, you can have regular contributions from your payroll via direct deposit or you can do a combination of the two.
According to Investopedia. A Keogh plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes.
A Keogh plan can be set up as a defined-benefit plan or defined-contribution plan, although most plans are set-up as a defined-contribution plan.
More on this later. The Keogh plan was initiated in 1962 and was the invention of a New York congressman named Eugene Keogh. Prior to 2001, they were very popular but due to changes in the tax system they were replaced by the SEP IRA, which has the same contribution limits and much less paperwork. Always a good thing.
So, how can this plan help me?
So who can set up a Keogh plan? Any self-employed individuals or any small business that is a sole proprietorship, partnership, or LLC.
This type of plan is a perfect choice for high-income earners.
Typically the Keogh is funded by the employer.
The Keogh comes in two kinds of flavors.
Defined contribution: these types of plans have two variations. Profit sharing and money purchase. The profit sharing version is most like a SEP, there is a ceiling on contributions. 25% of contributions or $53,000 in 2016. Below these limits you can contribute up to. With the money purchase plan, you can choose the percent you would like to contribute each year. And stick with it, if you don’t the IRS will become your best buddy. Not! Penalty for you.