Obama's myRA retirement accounts are now a reality

Obama myRA accounts — President Obama announced the myRA starter retirement accounts at last year's State of the Union.

Don't have a 401(k) or pension at your job? The federal government has an option for you called myRA.

President Obama announced his plans for the starter retirement savings accounts in his State of the Union address last year. The accounts will be backed by the government, charge no fees and you'll be able to contribute directly from each paycheck.

"Let's do more to help Americans save for retirement..." Obama said in his State of the Union address last year. "It's a new savings bond that encourages folks to build a nest egg."

The U.S. Treasury launched a small pilot program for the free accounts last month, but the agency says anyone who has direct deposit for their paycheck can sign up and start saving now.

Treasury also said it would begin promoting the accounts on a much broader scale later this year.

The accounts are targeted at the millions of low- and middle-income Americans who don't have access to employer-sponsored retirement plans, such as part-time workers or those at small businesses that are less likely to offer retirement benefits to their workers.

But any workers may invest in the accounts, including those who would like to supplement an existing 401(k) plan, as long as their household income falls below $191,000 a year for a married couple or $129,000 for an individual.

Here's how it works: the accounts are basically a new kind of Roth Individual Retirement Account, which means that you can invest after-tax dollars and withdraw the earnings tax-free in retirement. Plus, you can withdraw the funds you put into the account without penalty at any time.

Will your nest egg last?

But unlike private Roth IRAs, myRAs will be invested solely in government bonds and will be backed by the U.S. government -- meaning you can never lose your original investment. Plus, there will be no fees to eat into your annual returns.

Still, there are some drawbacks.

While the accounts offer a risk-free place to invest, the returns won't be great -- at least as long as U.S. interest rates stay so low.

The new U.S. Treasury security created for the accounts will earn the same rate as the Thrift Savings Plan's Government Securities Investment Fund that's offered to federal workers. That fund earned less than 2% in 2013, although it earned around 5% before the financial crisis.

With an average interest rate of 3%, for example, a saver investing $150 each month would accumulate almost $10,000 after five years, including around $560 in interest.

And while savers are allowed to contribute up to $5,500 in a single year, the myRA accounts cannot exceed a maximum balance of $15,000. At that point (or when an account has been open for 30 years), it must be rolled over into a private-sector Roth IRA, where the money can continue to grow tax-free.

Retirement savings advocates say that while far more needs to be done to get Americans to save for retirement, the accounts are a good first step.

"How do you get people to get their toe in the water in the system if the financial brokerages don't want the small accounts?" said William Gale, director of the Retirement Security Project at the Brookings Institution. "This is a way of bridging that gap, getting people going so that they get familiar with saving."

CNNMoney (New York) First published January 18, 2015: 10:21 AM ET