The retirement bill the House of Representatives passed on Thursday includes an assortment of changes for participants in 401(k) plans and owners of individual retirement accounts. The Senate may be poised to pass the bill, or a similar one, quickly and send it to President Trump, who is expected to sign it. Here’s what you can expect:
How annuities work
If you’re interested in annuities
It’ll become easier to convert your retirement savings into a steady lifetime income—a feature common to old-fashioned pensions—by buying an annuity in a 401(k)-style retirement plan. Currently, only 9% of employers offer this option, according to Vanguard Group Inc. Employers would be able to choose whether to offer an annuity and, if so, which type to offer.
If you’re over 70½
The bill repeals the age cap for contributing to a traditional IRA, currently 70½, making it easier for people with taxable compensation to continue saving. Also, the age to start taking required taxable withdrawals from 401(k)s and IRAs would increase to 72 from 70½.
If you participate in a 401(k) plan
The legislation would also make it easier for employees to understand how much monthly income their 401(k) balance would support by requiring employers to disclose an estimate on 401(k) statements.
If you work part time
Good news: The bill requires 401(k)-style retirement plans to allow long-tenured part-time employees working more than 500 hours a year to participate.
If you’re a new parent
The bill would allow you to take penalty-free distributions from 401(K)s and IRAs of up to $5,000 within a year of the birth or adoption of a child to cover associated expenses.
If you inherit an IRA
You’d no longer be able to liquidate the balance over your lifetime and stretch out tax payments. Instead, if you inherit tax-advantaged retirement accounts after Dec. 31, 2019, you must withdraw the money within a decade of the IRA owner’s death and pay any taxes due. Exceptions include surviving spouses and minor children.
If you have a 529 savings plan
You’d be able to withdraw as much as $10,000 from a 529 education-savings plan for repayments of some student loans.
If your employer doesn’t offer a retirement plan
An estimated 42% of private-sector workers don’t have access to a workplace retirement-savings plan. Under the bill, employers without retirement plans would have the option to band together to offer a 401(k)-type plan if they choose.