Significant Changes Are Coming to Retirement Plans: What You Need to Know
December 23, 2019 by Anne Tergesen
The spending bill the Senate passed on Thursday includes a variety of changes for people with retirement accounts.
Here are answers to questions Wall Street Journal readers have raised about the retirement provisions of the bill, which President Trump is expected to sign into law, and its effect on 401(k) and individual retirement accounts.
Q: I turned 70½ in 2019 and am scheduled to take my first required distribution from my retirement account by April 1, 2020. Can I take advantage of the law’s increase in the age for starting required distributions to 72?
No. Only account owners who turn 70½ after Dec. 31, 2019, can start mandatory distributions at 72 years old.
Q: The new law allows parents to take penalty-free withdrawals from retirement accounts upon the birth or adoption of a child. How will this work?
After Dec. 31, 2019, parents can withdraw up to $5,000 from a retirement account within a year of a child’s birth or adoption. The law waives the 10% penalty owners younger than 59½ would normally owe. But they must pay income tax on the withdrawal.
“This should only be used as a last resort,” said Ed Slott, an IRA consultant in Rockville Centre, N.Y., who recommends taking advantage of a provision of the law that allows the money to be repaid. “To start withdrawing money from retirement savings kills off years of compounding.”