WASHINGTON (3/6/14)--Credit unions once again shone by a comparison of their service to consumers, this time in a Forbes magazine article that discussed the virtues and challenges of the Obama administration's new MyRA retirement account and how it compares with traditional Roth IRAs.
Credit Union National Association Chief Economist Bill Hampel was extensively quoted in the broad article, describing the lower-cost retirement account services available at credit unions.
The Forbes article listed key selling points of the MyRA, especially for Millennials and others just starting to save: There's no annual account maintenance fee; an account can be opened with as little as $25; additional contributions can be as small as $5 every payday; and, if an employer agrees, savings can be deducted automatically from a saver's paycheck, as they are with 401(k) contributions.
One big drawback however, Forbes says, is that the MyRA will not be available until much later this year. As everyone knows, the article says, this very minute is the best time to start retirement savings.
That brings the choice back to Roth IRAs, which are not terribly different from the proposed MyRA. However, Forbes warns, the fees and minimums can be significantly higher and, to make it all that much more difficult, it is hard to compare offerings.
That's where credit unions come in, says CUNA's Hampel.
"(M)ost credit unions will allow you to open a Roth IRA with that same $25 minimum MyRA will have," Hampel points out, adding, "The MyRA is, in essence, a formalized version of what most credit unions already offer."
"Moreover," he says, "if you schedule an automatic transfer from your checking account, or if your HR department allows you to set up an automatic transfer from your paycheck before it hits your checking account, you can have amounts as small as $25 or even $5 per pay period regularly transferred into that credit union Roth--again, much like the MyRA."
While it's true that the yield on Roth IRAs can be low, Hampel argues that beginner savers shouldn't get hung up on the small number in the "rate of return" category. "There is a time to be concerned about rates, but it's not when you have a really small balance,'' he says.