The last Act that specifically helped retirement plan participants was the 2019 SECURE Act. Some of the highlights from this Act were:
- Repeals the maximum age for traditional IRA contributions.
- Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½).
- Allows long-term, part-time workers to participate in 401(k) plans.
- Offers more options for lifetime income strategies.
- Permits parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses.
- Allows parents to withdraw up to $10,000 from 529 plans to repay student loans.
Another current tax break that’s fairly new is easily missed. It’s called the “saver incentive” and rewards lower-income workers who put money in an IRA, 401(k), 403(b), SEP or similar retirement plan. The maximum saver’s credit of $2,000 for joint filers and $1,000 for others is capped at 50%, 20% or 10% of payins, depending on adjusted gross income. It fully phases out at AGIs over $33,000 for single filers, $49,500 for heads of household and $66,000 for joint filers. Lawmakers want more incentives for these savers in the future.
That’s where we are now. Pension plans are a hot topic in the House and Senate right now, so expect to see more discussion and possible changes. The goal is to encourage retirement savings, new ways to withdraw retirement funds and more encouragement for small employers to offer workplace retirement plans. Specifically, some of the changes may include:
Raise the age for required minimum distributions from 72 to 75.
Allow more part-timers to participate in 401(k)s.
Tax credits for small businesses that offer workplace retirement plans.
Taxpayers age 60+ can contribute more to 401(k)s.
Expanding qualified charitable distributions.
Letting employers offer student debt relief through workplace retirement plans.
And requiring automatic enrollment in workplace plans, with an employee opt-out.
To balance it out, retirement contribution benefits may shrink for people with accounts over a certain balance or with higher incomes.
This is a very hot topic. Stay tuned to our blogs and to our FREE Tax Alerts https://www.ustaxaid.com/free-tax-updates/