Increased Required Minimum Distributions age
- As of January 1, 2020, the Required Minimum Distribution (RMD) rules have been updated, increasing the age on which you must take an RMD from age 70.5 to 72 for those born on or after July 1, 1949.
- An RMD is the amount of money you must withdraw each year from a Company Retirement Plan or IRA in order to avoid tax consequences. There are some other rules besides age that determine the exact timing and amount of the RMD and what accounts to use for the RMD. Have more questions about RMD's? Contact your financial advisor or a certified tax professional.
Elimination of age restriction for traditional IRA contributions
- Beginning with the 2020 tax year, there is no age restriction stopping you from continuing to make traditional IRA contributions as long as you are working. Previously, regardless of your employment status, you were no longer able to contribute to a traditional IRA after age 70.5.
- If you want to learn more about this change to the rules around IRA contributions, you are encouraged to reach out to a financial advisor or tax professional.
Part-time employees now eligible for employer retirement plans
- If you've been missing out on participating in an employer-sponsored retirement plan due to your part-time status, you may become eligible to participate in 2024.
- While there are stipulations involved, and you may not be eligible to receive employer contributions to your retirement account, long-term part-time employees who have worked at least 500 hours per year for three consecutive years, will be able to start participating in their employer's sponsored retirement plan.
- Have more questions about your future eligibility? Reach out to your HR representative or a tax professional.
Penalty-free withdrawal after childbirth or adoption
- As of January 1, 2020, new parents (through birth or adoption) are eligible to take up to a $5,000 penalty-free withdrawal to help with expenses. The withdrawal, which can be taken up to one year post adoption or birth by each parent separately, can also be repaid to the applicable retirement account(s).
- Interested in taking advantage of this new provision or want to learn more? Reach out to a financial advisor or tax professional.
529 Funds can be used to pay off student loans
- As of January 1, 2020, parents who have contributed to a 529 plan to save for kids' education expenses can now use up to $10,000 of those funds to repay student loans. Previously, qualified expenses for higher education did not encompass student loans, but now has been widened to include them.
- Other qualified education expenses include fees, textbooks, supplies, and required equipment. if you have any questions about what qualifies as an education expense, or how to take advantage of the widened 529 plan provisions, contact a financial advisor or tax professional.