Senators Ben Cardin (D-MD) and Rob Portman (R-OH) recently introduced legislation that would raise the age for Required Minimum Distributions (RMDs) and increase the amount for catch-up contributions for retirement savings accounts.
If passed, the Retirement Security and Savings Act (S. 1770) would:
- Raise the age for required minimum distributions from age 72 to age 75 by 2032.
- Create an exception from required minimum distributions for individuals with $100,000 or less in aggregate retirement savings.
- Reduce the current penalty for failing to take required minimum distributions from 50 percent of the shortfall amount to 25 percent in most cases, and as low as 10 percent, if you self correct.
- Increase the catch-up contribution limits from $6,500 to $10,000 for baby boomers (individuals over age 60) with 401(k)-type savings plans (including the Thrift Savings Plan for federal employees).
- Index to inflation the allowable catch-up contribution to Individual Retirement Accounts (IRAs).
“This bipartisan legislation includes sweeping reforms to help Americans save more for retirement by allowing people who have saved too little to set more aside for their retirement, helping small businesses offer 401(k)s and other retirement plans, expanding access to retirement savings plans for low-income Americans without coverage, and providing more certainty and flexibility during Americans’ retirement years,” said Portman.
To read the full text of the Senate bill, go here.
House Bill Has Similar Provisions
Congressmen Richard Neal (D-MA) and Kevin Brady (R-TX) have also sponsored legislation in the House with similar provisions.
The Securing a Strong Retirement Act (HR 2954) would increase the RMD age to 73 on Jan. 1, 2022, to age 74 in 2029, and then to age 75 in 2032. The bill would also increase the annual limit on catch-up contributions to $10,000 for those between the ages of 62 and 64 requiring that catch-up contributions only be made after-tax into Roth 401(k) accounts.
To read the full text of the House bill, go here.