Great Federal Programs For Boosting Your Savings

The following is a post by MPFJ staff writer, Toi Williams, who is a professional finance blogger for MarketBeat. She has backgrounds in personal finance, sales, and real estate.

Millions of Americans are having difficulty saving for their future. According to a report published in Forbes, roughly 63 percent of Americans say they would have difficulty coming up with $1,000 to handle a financial emergency.

The struggles of such a large segment of the populace has prompted the federal government to find ways to help. Government agencies have developed a number of programs designed to encourage saving by people of all ages.

Here are several of the most popular programs.


Saving For College

If you are planning on paying for college in the future, you might want to take advantage of a 529 plan. A 529 plan is a tax-advantaged savings plan designed to encourage saving for college costs. The plans are authorized by Section 529 of the Internal Revenue Code and are sponsored by states, state agencies, or educational institutions. All fifty states and the District of Columbia sponsor at least one type of 529 plan.

There are two types of 529 plans available, both with considerably different features. The first type is a pre-paid tuition plan, which allows savers to purchase units or credits at participating colleges and universities to lock in the current price. The credits can generally be used to cover tuition and mandatory fees. There may be exceptions for other qualified expenses provided by the plan’s sponsor.

Pre-paid tuition plans often have an age or grade limit for participants. The payments made from the plan are often based on the age of the student and the number of years of college tuition purchased. Depending on the plan chosen, the student will receive a lump sum or installment payments to pay for their college costs.

The second type of 529 plan is generally known as a college savings plan. These plans establish an account for the purpose of paying the student’s eligible college expenses. All qualified higher education expenses are covered, including tuition, mandatory fees, covered required supplies, and room and board. There are generally no age limits or residency requirements for these plans. Withdrawals from college savings plans can generally be used at any college or university.

College savings plans invest in stock mutual funds, bond mutual funds, and money market funds on behalf of the account holder. The investments in mutual funds are not guaranteed by state governments and are not federally insured, so losses are possible. However, earnings in 529 plans are not subject to federal tax as long as the withdrawals are used for eligible college expenses. They may not be subject to state tax either.


Saving For Retirement

The federal government is also trying to help more people save for retirement, which is an important goal for our country. About half of U.S. workers don’t get a pension or 401(k) from their employers and millions of workers do not have any retirement savings at all. As of the end of last year, 68 percent of America’s workforce reported that they are not participating in an employer-sponsored plan.

The United States Department of the Treasury developed myRA to remove common barriers to saving for retirement for people who don’t have access to an employer-sponsored retirement savings plans. myRA is a Roth IRA retirement savings account with no start-up cost, no fees, no minimum contribution requirement, and no risk of losing money. The plan is meant to be a starter account for long-term retirement savings. The idea is that participants will graduate to IRAs and employer-sponsored retirement plans once they get their retirement finances started with the myRA.

To be eligible for myRA, participants must make less than $131,000 a year (or $193,000 for married couples). People can contribute up to $5,500 per year to their myRA account (or $6,500 per year for those age 50 and over). The account maxes out at a balance of $15,000, but participants can keep a lower balance for up to 30 years. If either of those limits is reached, the savings will be transferred or rolled over into a private-sector Roth IRA.

Contributions can be made by linking a checking or savings account to the myRA, transferring after-tax dollars from a paycheck, or directing some of their federal tax refund to the account. Initial myRA investments are set at $25 with subsequent contribution limits set at $5. Most of the participants using myRA make monthly contributions that average between $50 and $100. If a participant changes jobs, they can keep contributing to the same myRA account without interruption.

Contributions are invested in a new United States Treasury security that earns interest at the same variable rate as investments in the government securities fund for federal employees. The Treasury Securities Fund offered a return of 2.9 percent over the past decade, which is still better than a typical savings account. Participants can pull out the money contributed (but not the interest) at any time without penalty. Barring specific exceptions, participants can only withdraw the earned interest free of tax and penalty if they are at least 59-1/2 years old and made their first contribution to the account at least five years ago.


Investing In Securities

The TreasuryDirect program allows US individual investors to purchase Treasury securities directly from the U.S. government. Participants can choose from Treasury Bills, Notes, Bonds, Inflation-Protected Securities, and Series I and EE Savings Bonds. The TreasuryDirect website is run by the Bureau of the Fiscal Service under the United States Department of the Treasury.

The TreasuryDirect program eliminates many of the hassles that come from handling physical securities. The securities are held in the account in paperless electronic form. Because they are stored online, they cannot be forgotten or lost and heirs will be able to easily locate them in the future. According to the Treasury Department, there are billions of dollars in matured savings bonds outstanding that have yet to be redeemed.

Users can manage their savings portfolio online as their needs or financial circumstances evolve. From the website, participants can deposit money from their personal bank accounts or withdraw money from the TreasuryDirect account. To redeem the purchased securities, the user selects what securities they want to sell on the website and what account they would like the proceeds to be deposited in. There are no redemption limits to worry about and no fees for purchases.

TreasuryDirect’s security system is top of the line, requiring user names and passwords as well as security codes from a plastic card that the Treasury provides for the account. The money in the account is backed by the full faith of the U.S. government. The website also allows the transferring and gifting of savings bonds, which is a great way to get children and grandchildren on the path to saving for the future.

How about you all? Have you used any of these programs? 

Please share your experiences by commenting below! 

***Photo courtesy of

Buying Government Securities Through Treasury Direct

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The following post is by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry.

If you’re looking for a way to escape turmoil in the financial markets, there’s no better place to be than cash. If you’re looking for cash-type investments, there’s no better and safer place to be than in U.S. Treasury securities. And, if you’re looking to buy and hold U.S. Treasury securities, there’s no better way to do it than with Treasury Direct.

With Treasury Direct, you can buy and hold U.S. Treasury Securities directly from the U.S. Government in denominations as small as $100.

How to buy through Treasury Direct

You start by setting up an account on Treasury Direct called a Treasury Securities Account, and you can do this by clicking “open an account” on the website. You’ll be required to provide your Social Security number, email address, and bank account and bank routing numbers.

Purchasing a Treasury bill is called “bidding”, and they’re purchased at a discount. The difference between what you pay—the discount—and the bill’s face value is your return, or interest paid at maturity. For example, the face value of a bill is $1,000, but you purchase it for $990. When the bill matures, you’re paid the $1,000 face value which includes your purchase price of $990, plus $10 which represents the interest portion.

There are two types of bids you can use, but when you use Treasury direct, you can only use a non-competitive bid. Under this type of bid, you accept what ever discount the discount rate is as determined by the Treasury auction. You will be guaranteed to receive the security you want in what ever quantity you choose.

The second type of bid is a competitive bid, and this is available only through a bank, broker or dealer. Under this type of bid, you specify the discount rate you want. You may or may not get the discount you want and even if you do, it may be less than what you want.

When you buy a security, the funds for the purchase are withdrawn from your bank account. And when the security matures, the funds will automatically be deposited back into your bank account. You can also set up your Treasury Direct account to automatically roll over funds from one security to another at maturity.

Types of Treasury securities available through Treasury Direct

With a Treasury Direct account, you can purchase the following Treasury securities:

  1. U.S. Savings Bonds
  2. U.S. Treasury bills (in maturities of 4, 13, 26 and 52 weeks)
  3. U.S. Treasury Notes (in maturities of 2, 3, 5, 7 and 10 years)
  4. U.S. Treasury Bonds (30 year maturities)
  5. TIPS – Treasury Inflation Protected Securities

Selling your Treasuries

When you buy Treasury securities through Treasury Direct, you will have to hold them until they mature if you hold them with Treasury Direct after purchase. Though it’s easy to buy Treasuries through Treasury Direct, the program is set as a way to buy and hold the securities to maturity.

Selling is trickier, but no worse than how you would handle it anywhere else you would sell them. In order to sell a Treasury security that is being held with Treasury Direct, you will either need to move it out of the program, or you can sell it in the account through the Federal Reserve Bank of Chicago (there will be a fee for this). Treasury Direct itself does not act as a secondary market for its securities.

Why not go through a bank, broker, or mutual fund?

There are different accounts you can buy Treasury securities through, but Treasury Direct has some strong advantages over the alternatives.

  • No transaction fees. Some institutions charge fees for handling treasury transactions, but even those that don’t skim will skim some out. An institution can instead buy the securities at a given price then sell them to you at a slightly higher price. Mutual funds typically have management fees and other fees that they charge on your account, even if it’s a “no load” fund. No matter how it’s handled, you will pay some sort of fee for the service. With Treasury Direct, there is no fee—you’re dealing direct. Considering today’s extremely low interest rates, a fee that’s no more than a small sliver of 1% can make a difference, especially over the long run. 
  • No risk of institutional failure. Since you aren’t using an intermediary to buy and hold your securities, there is no risk of institution failure. The securities are held with the US Treasury, which are backed by the full faith and credit of the United States Government. 
  • Set your own maturity allocations. This applies mostly to mutual funds, but when you invest in treasuries through a mutual fund, your maturity allocations will be established by the fund—you’ll have no ability to change that. But let’s say that you believe that interest rates will soon rise, and instead of having the 20% allocation in 26 week treasury bills the mutual fund has, you want to have 80%. With Treasury Direct, you can do that. In fact, you can have any allocation you like. And here’s something else about mutual funds: very few are true pure plays. A fund that invests primarily in Treasury securities may also hold small positions in derivatives and other non-Treasury investments.

Have you ever used Treasury Direct for your fixed income investments? If so, did you find the system pretty easy to navigate? 

If not, what do you use as a ‘house’ for your fixed income investments?

    ***Photo courtesy of