The new federal spending bill includes numerous changes to retirement plans that introduce new twists to both Roth IRAs and Roth 401(k)s, writes Ron Lieber for The New York Times.

Roth accounts differ from standard workplace 401(k) or 403(b) accounts, as well as everyday IRAs, due to the way you pay income taxes.

Instead of paying income taxes when you withdraw the invested money, you pay income taxes the same year you deposit the money into Roth accounts. When you later withdraw the money, you usually do not have to pay taxes on earnings in the account.

Under the new Roth IRA rules, you no longer have to start withdrawing money at 72, as is the case with regular IRAs. If you do not need the money in your Roth account, you can let the entire balance keep growing.

Meanwhile, any money you have in Roth 401(k)s that currently has to be withdrawn on the same schedule as a regular 401(k) would have the same rule as Roth IRAs beginning in 2024.

Additionally, the new rules allow employers to give employees an option to choose where to put their matching Roth 401(k) contributions: a regular 401(k) or a Roth 401(4). Currently, they have to be put into a regular 401(k) account.

Once the new bill is signed, all investors over 50 who are putting this so-called catch-up retirement money into their accounts will have to put it into a Roth 401(k) starting in 2024.

Finally, the new bill also provides investors with a way that would use their leftover 529 savings without having to pay extra taxes or penalties on it. Starting in 2024, they would be able to move the leftover funds into a Roth I.R.A., with a few restrictions on higher amounts.

Read more about the changes in The New York Times.

_________

Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of  Creative Capital Wealth Management Group‘s Wealth Strategists. 

It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.

.

.

.

.