We are still in the process of determining the long-term implications of all parts of the bill, but upon initial review, the following are five of the most significant provisions:
• Increase in age for required minimum distribution - Starting in 2020, the bill increases the required minimum distribution (RMD) age from 70 ½ to 72. Anyone turning 70 ½ in 2020 is not required to take an RMD. Anyone who has started RMDs prior to 2020 will need to continue taking them going forward.
• Removal of the "stretch" IRA option - For certain non-spouse beneficiaries, an inherited IRA will need to be distributed by the end of the 10th calendar year following the individual’s death.
All inherited IRAs with a death date of 2019 or prior retain the ability to stretch the distribution over the beneficiary’s lifetime, even if the account is created in 2020 (i.e., pass away in 2019 and elect stretch in 2020).
• Repeal of maximum age for traditional IRA contributions - Any person over 70 ½ who has U.S. earned income will be eligible to make contributions to a traditional IRA starting in 2020.
• Expansion of section 529 plans - Parents can now use their 529 account to cover costs associated with registered apprenticeships and for up to $10,000 of qualified student loan repayments.
• Tax credits for business retirement plans - The new law increases the maximum credit for startup plans from $500 to $5,000. A new tax credit of $500 is also available for some smaller employers who set up automatic enrollment in their plans.
John Renda is a financial advisor with Edward Jones.