Savings for Retirement Will Soon Be Easier
Here’s some good news for your eventual retirement: Congress is trying to make it easier for you to save for the day you can finally leave your portfolio and relax on the beach.
The 2019 Every Community Pension Raise Act, also known as the Security Act, was included in the government’s year-end spending bill that was approved by the House of Representatives this week. He then enters the Senate, which is expected to approve him before the holidays.
What’s in the legislation? Lots of new rules to make saving for retirement easier. Let’s take a look at a few highlights:
Changes in pension contributions
Employees who work part-time for a 401 (k) company will be able to participate in this plan. Eligibility can be determined in two ways: 1. An employee works less than 1000 hours per year for at least one year, or 2. The employee works at least 500 hours per year for three consecutive years.
Small businesses will be able to receive a $ 500 tax credit to create new 401 (k) plans or SIMPLE IRAs that include automatic registration. Smaller employers who already offer retirement savings plans can convert them to auto enrollment for a loan. The loan is provided for a period of three years.
Graduate students and graduate students who receive taxable non-tuition payments (such as scholarships or scholarships) will be able to use this income to contribute to the IRA. These financial awards are often exempt from income tax, which makes it impossible for a student to contribute to the IRA.
Some home health care providers who are tax exempt because their income is considered a “difficulty of caring” payment will be able to contribute to the IRA.
Changes in pension payments
The law removes the maximum age at which you can contribute to a traditional IRA (currently 70.5).
It also increases the age at which retirement benefits become mandatory from 70.5 to 72 years.
The law allows leaving pension plans without penalties in the event of birth or adoption. There is currently a 10% penalty on top of the normal tax rate for early dropouts that are not related to tuition fees, home purchases, funerals, or certain hardships.
Additional tuition bonus
The law expands 529 education savings accounts to cover apprenticeship costs to $ 10,000 for student loan repayments and private elementary or high schools.
Of course, Senate adoption and approval by President Trump does not immediately bring this policy into effect – change takes time. But you will want to keep track of changes as new rules are introduced.
This story was originally published in 2019 and was updated on 1/6/2019 to correct the 529 plan funds eligibility.