NEW YORK (MainStreet) — Edward Zeamek works two jobs and is searching for a third to pay expenses. “It’s what’s got to be done to make it in the world today,” said Zeamek, who works as a teacher and fireman. “My next job will be bartending or working at a gym.”
In light of this struggle, the 32-year-old is disappointed with his retirement prospects: even though he owns a car and has access to a pension through his job as a teacher in New Jersey, Zeamek doesn't have much confidence funds will be there when he reaches 75 years old.
That uncertainty regarding the future is driving more Millennials to investigate a My Retirement Account (myRA), the pension account President Obama introduced during last year's State of the Union. A full 78% of Millennials would enroll in a myRA if eligible, according to a recent BlackRock survey.
"I wish I could save more in my 403b plan, because my state pension may not be in existence when I retire," Zeamek said. "Things fluctuate so much."Amid anxiety around traditional retirement plans, Millennials like Zeamek are being proactive about their future.
“To their credit, Millennials are doing things that generally are linked to higher financial confidence,” said Heather Pelant, personal investor strategist with BlackRock.
The myRA is more of a sure bet when it comes to retirement.
Inside the myRA
Offered on a voluntary basis by employers, the myRA is designed for low- and middle-income Americans who don't have access to employer-sponsored retirement plans, such as 401(k)plans.
“These accounts are guaranteed to never lose value by the Treasury,” said Jake Lowrey, president of Lowrey Financial Group. That’s because the myRA only invests in government bonds (G Fund) until accumulated money is rolled into a Roth IRA where investors have more choices.
“Consumers won’t have management fees negatively impacting their MyRA accounts and will be limited on the downside risk based on the investment option,” Lowery told MainStreet.
Getting on Track with a MyRA
Although 64% of millennials have a financial plan, 36% of Millennials guessed at how much they will need to fund their retirement and 25% don’t know if they even have a 401(k) plan, according to a Nationwide Retirement Institute report.
“A financial plan needs to include a realistic picture of your financial status including any debts,” said Mike Spangler, president of the mutual funds business with Nationwide, which manages 114 funds and $57.8 billion in assets. “It also needs to be flexible and take a long-term view and should include your goals and objectives in a way that is measurable and actionable.”
With a MyRA, investors are only able to contribute to the account through automatic payroll deductions, and once the balance exceeds $15,000 or the holder is 30 years of age, funds are required to transfer to a private sector Roth IRA.
“You can open a myRA with as little as $25 and direct $5 or more each paycheck,” Lowrey told MainStreet. “This is the only way to contribute to a myRA, whereas you can deposit funds into a traditional IRA at any point and receive a deduction on your taxes depending on income.”
The difference is that earnings can be withdrawn tax free once the myRA is five years old and the owner is 59 ½. Although the myRA only offers the government securities fund (G Fund) as an investment option, once the funds are rolled into a Roth IRA the investor would have more choices. The MyRA is scheduled to launch next year.-Written for MainStreet by Juliette Fairley