Congress spending and wasting your money??
The House of Representatives has passed a bill with nearly 100% of the votes which may change the way we plan for retirement. There are three key changes which will come into play if the current version of the bill is passed. Not all of the changes are good for all people. This is not surprising.
First, the bill increases the age required to take Required Minimum Distributions (RMD’s) from age 70 ½ to age 72. That is 18 additional months that folks can wait to take money out of their qualified retirement accounts which would ordinarily cause income tax to be paid. Any CPA will tell you: It is very exciting to be able to defer taxes anytime especially when working with a 70-something person who may have paid taxes for five decades!
Previously, taxpayers could not contribute to traditional IRAs once they reached age 70 ½ and the new law removes this age cap. More 70-somethings will now be eligible to take a deduction for these IRA contributions thus lowering their tax bills in the process.
Other benefits from the act include allowing retirement benefits for long-term, part-time employees, allowing penalty-free withdrawals up to $5,000 from retirement plans for the birth or adoption of a child, relaxing rules on employers offering annuities through sponsored retirement plans, and allowing penalty-free withdrawals of up to $10,000 from 529 education-savings plans for the repayment of certain student loans.
But it is not all hunky dory with this law as one part of the legislation erases the benefit of the non-spouse beneficiary from spreading the RMD over from the account over his or her life expectancy. Under the new regulation the account will have to be withdrawn over 10 years and not the life of the beneficiary. This can result in significant tax and retirement consequences for those who have to withdraw over 10 years as opposed to over as many as 40 or more years.
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About Stu: With more than 29 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.