A Simple myRA “Hack” to Supercharge Your Savings Interest Earnings
Personal_Finance / Savings Accounts Nov 15, 2015 - 03:08 PM GMTBy: Investment_U
Andrew Snyder writes: For income investors, times have rarely been harder. But Obama may have just accidentally created a lucrative solution.
We all know the problem. The Fed.
In its effort to keep the Great Recession from turning into something even worse, the country’s monetary maestros cut rates and kept them there. More than eight years after pulling rates lower, interest rates remain, in the simplest terms, dead.
Even with a small, token rate hike looming, it’s clear income investors will likely suffer for at least another decade. The likelihood of rates returning to “normal” is shrinking by the day.
For many investors, that’s terrifying.
Last week, the president of the St. Louis Fed echoed our concerns. In a speech titled “Permazero,” James Bullard wondered if we need to alter our expectations. There’s a new normal, he argued.
“Should we find ourselves in a persistent state of low nominal interest rates and low inflation,” he said, “some of our fundamental assumptions about how U.S. monetary policy works may have to be altered.”
In other words, the rules must be rewritten.
That’s a frightening idea. It’s a direct attack on our idea of liberty through wealth. Without reliable income from your investments, true freedom is tough to reach.
Fortunately, we have a solution.
I uncovered this “hack” while I was researching Obama’s myRA plan, an odd new type of retirement savings account. The plan lets Americans invest directly in U.S. Treasury debt.
As we showed last week, the whole myRA idea is a debacle.
But I found a loophole.
It’s a simple way to use a free myRA account to lock in a high-yielding no-risk savings account - a yield that’s more than 10 times higher than the national average.
With interest rates virtually dead, the idea of stashing money in the bank and actually getting paid for saving is all but gone. In fact, the national average interest rate for a savings account is somewhere in the neighborhood of just 0.17%.
That’s pitiful.
Fortunately, I’ve found an entirely legal, easy-to-use “hack” that lets you bump that figure to something much, much higher.
Last year, you could have earned 2.31%.
And over the last decade, you could have earned an average of 3.19%.
Again, it’s entirely risk-free. It’s as safe as - probably even safer than - depositing money at your local bank.
Here’s the hack.
When Washington wrote the law that created these new myRA accounts, its goal was to make the plans as simple as possible. In turn, it created a gaping loophole.
You see, while a myRA is technically a retirement account, the law has no penalties for early withdrawals of your principal. That means, while it’s not Obama’s intent, you can use the account just like a traditional savings account... depositing and withdrawing money any time you’d like.
And any money in the account will earn more risk-free interest than anywhere else.
For folks aged 59 1/2 or older, the deal is even sweeter...
You can take your interest earnings out without the traditional 10% penalty of a Roth IRA.
And even if you’re younger than 59 1/2, you likely qualify for one of the 10 ways to avoid the penalty... like using the interest payments to buy health insurance, buy a new house or even pay for school.
Signing up for a myRA is easy. Simply go to myRA.gov and follow the simple instructions.
Intentional or not, it’s the perfect way to overcome the death of traditional savings accounts.
Good investing,
Andrew
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