Are Retirement Plan Changes on the Way?

It’s Tim here, blogging once again about one of my favorite topics….

Once again, Congress is “looking” at regarding changes to retirement savings plans.  No one knows what will actually pass.

Reportedly under discussion: 

• Raising the age of taking Required Minimum Distributions (RMDs) from 72 to 75.   This would be done over a 2-to-3-year period.

• Letting people over 60 contribute more to 401Ks.

• Allowing part time workers to contribute to 401Ks

• A revenue raising proposal to reduce the amount of pretax pay into 401K’s.  This bipartisan house bill would require that catch-up contributions to workplace qualified retirement plans would be subject to Roth treatment.  This means that the extra $6500 contributed by workers who are 50 or older would automatically go into a Roth 401K and come from post-tax salary rather than pre-tax wages.   Another provision would provide the option of having employer matching contributions put into a Roth 401K account.   This raises tax revenues today to pay for other retirement savings measures.   This may not be a bad thing. 

• Ideas to limit Roth IRA benefits for high income earners are back on the table.  The 2016 proposal prohibited contributions to Roth IRAs with balances over $5MM.   It also called for limiting high earning individuals from making after tax deposits into traditional IRAs and then converting them over to Roths.  Both proposals were pushed by Sen. Ron Wyden (D-OR) who now heads the Senate Finance Com., which is the tax writing committee for the upper chamber.  As of 2019, 28,615 individuals had $5MM or more in their IRAs (this compares to 8,000 in 2011).  Of these 497 have over $25MM or more. 

 Stay tuned!