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How Trump's Retirement Decision Could Affect Your Savings
President Donald Trump signed an executive order on Aug. 31, 2018 calling for the U.S. Department of Labor and Department of the Treasury to consider raising the age for Required Minimum Distributions (RMDs) from retirement accounts.
The Trump administration gave the Department of the Treasury six months to decide if that age should be increased, so a decision is due around the end of February.
Why the Change is Important for Your Retirement
Raising the age limit could help you save more for retirement because you would have a few more years for interest to compound in your tax-advantaged retirement accounts.
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The current age for people with a 401(k) plan or traditional IRA to start taking minimum distributions is 70 1/2 years old. You’re required to begin taking distributions by April 1 of the following calendar year after you turn 70 1/2 years old.
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You can be exempt from this rule if you are still employed, but once you retire, this age requirement applies to you.
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Roth IRAs are also exempt from this rule, as you were taxed on your contributions.
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The amount of money you are required to withdraw from your 401(k) or IRA depends on the account’s balance and the current life expectancy for men and women.
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All the money disbursed is considered taxable income, so make sure to set funds aside for taxes.
How to Ensure You're Ready for Trump's Retirement Change
Understanding RMDs can be complicated, especially any tax issues. Discussing this with a financial advisor can help you avoid any IRS headaches down the road. Advisors can also provide guidance on how to utilize other investment accounts so you can delay tapping your 401(k) or IRA until RMDs kick in.
Chances are, there are several highly-qualified financial advisors in your town. However, it can seem daunting to choose one.
This new tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have passed a rigorous screening process.
Follow These Steps to Get Matched With the Right Advisor for You
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SmartAsset - copyright 2018
SmartAsset - copyright 2018