Last year’s $1.7 trillion Congressional spending bill included dozens of new provisions that will alter how Americans handle retirement. What you may have missed in the new legislation: Larger catch-up contributions for savers close to retirement…higher age limits allowing retirees to delay required minimum distributions (RMDs) from traditional 401(k)s and IRAs…and more opportunities to protect against running out of money in advanced old age.

Bottom Line Personal asked Ed Slott, CPA, to highlight the important changes in the laws and ways to use them to plan your retirement…


Required minimum distributions (RMDs) have been delayed. In the past, taxpayers had to begin taking RMDs from traditional retirement accounts at age 72.

What’s new: The minimum age now is 73…and it rises to 75 on January 1, 2033.

My take: Retirees can get several more years of tax-deferred growth in traditional retirement vehicles.

But beware: This could wind up as a tax trap if you have a large nest egg. When RMDs do kick in, you’ll have to withdraw more money annually over a shorter period according to IRS life-expectancy estimates. That could push you into a higher tax bracket (and possibly higher Medicare brackets and cause your Social Security benefits to be taxed at a higher rate).

Tax-savvy approach: Reduce traditional retirement accounts in the years before RMDs, and start to take advantage of today’s low income tax rates. (Current rates are scheduled to expire after the 2025 tax year and revert to their higher 2017 levels.) Example: You can convert part of your traditional IRA to a Roth IRA now…or reposition traditional IRA savings into permanent life insurance or taxable investment accounts.

Penalties for missed RMDs are lower. The penalty for taking less than the required distribution in a given year used to be 50% of the amount that should have been withdrawn.

What’s new: Congress reduced the penalty to 25% of the required amount. And that penalty drops to 10% if you withdraw the necessary funds by the end of the second year following the year it was due. Example: An incorrect RMD for 2023 would need to be corrected by December 31, 2025.

My take: Despite the penalty reductions, retirees should be vigilant—it’s easy to miscalculate your RMD or take it from the wrong type of account. If you get hit with a penalty, you may be able to get it waived if you establish that the shortfall in distributions was due to reasonable cause, such as illness, a death in the family or relying on incorrect professional advice. See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, at

Roth 401(k) accounts are no longer subject to RMDs. In the past, Roth 401(k) accounts were subject to RMDs.

What’s new: Starting in 2024, Roth 401(k)s will be treated like Roth IRAs, and lifetime RMDs don’t ever have to be taken.

My take: This minor change does away with the annoyance of having to roll over funds from a Roth 401(k) into a Roth IRA just to avoid RMDs. It also allows you to stick with your Roth 401(k) if you like the investment options or need creditor protection.

Hardship withdrawals from retirement accounts get easier. Typically, if you withdraw money from your 401(k) or IRA before age 59½, you can avoid a penalty equal to 10% of the withdrawn amount as long as the need is for qualified exemptions such as medical, first-time home owner or tuition expenses.

What’s new: This list of exemptions has been expanded to include…

Long-term-care premiums. Starting in 2025, you can withdraw up to $2,500 annually from your 401(k) for these.

Emergency expenses. Starting in 2024, you can withdraw up to $1,000 annually for any personal or family emergency. You have the option of repaying the withdrawal within the following three years. But: You cannot make additional emergency withdrawals within the three-year period if the previous repayment has not been made or additional contributions have not been made equal to or exceeding the repayment amount.

Federally declared natural disasters. You can withdraw up to $22,000 annually. This includes withdrawals to cover disasters retroactively to January 26, 2021.

My take: Resist the temptation to tap retirement accounts early—even though the government has made it easier to do so. You still have to pay taxes on the withdrawals, and that money no longer compounds tax-deferred.

Leftover savings in a 529 plan can be rolled into a Roth IRA. In the past, grandparents worried about funding a 529 college savings account for a grandchild because the savings could get trapped. If the child didn’t go to college, withdrawing the money could trigger federal income taxes and a 10% penalty.

What’s new: Starting in 2024, you can move up to $35,000 (a lifetime limit) tax- and penalty-free from a 529 account you own into the beneficiary’s Roth IRA—as long as the 529 plan has been in existence for at least 15 years.

My take: Be careful with this. The rollover process could take several years for large amounts left in a 529 because you are allowed to contribute only a limited amount each year to a Roth IRA. Example: In 2023, Roth IRA contribution limits are $6,500 or ($7,500 if you are 50 or over). So if you had $20,000 in your 529, you’d need three years to roll over the entire amount.


Catch-up contributions to retirement savings are even better. Savers over 50 years old are allowed to stash more money into retirement savings accounts than younger workers.

What’s new: Congress has further enhanced that ability by adding a special catch-up contribution limit for employees ages 60 to 63 starting in 2025.

For most 401(k) plans and other employer-sponsored retirement plans, the amount can be the greater of $10,000 or 150% of the “standard” catch-up contribution amount for 2024 (not yet determined). Amounts will be adjusted for inflation each year starting in 2026.

My take: These changes are useful for workers who haven’t saved enough and are scrambling to make up the shortfall. There also are two minor tweaks to contribution limits worth noting…

Starting in 2024, the annual catch-up contribution of $1,000 that retirement savers age 50 and over are allowed in their IRAs or Roth IRAs will be indexed for inflation each year.

Also starting in 2024, all 401(k) catch-up contributions from highly paid workers (wages over $145,000 during the previous year) must be deposited into after-tax Roth 401(k)s, not traditional pretax 401(k)s.

You have more time to set up a solo 401(k). Previously, self-employed individuals had to set up an individual or solo 401(k) retirement plan by December 31 to make contributions for that year.

What’s new: You will have until you file your tax return in April of the following year to open and fund the account. This change won’t be available until the 2023 tax year.

You can choose where your employer-matching dollars go. In the past, all employer-matching dollars were deposited into pretax accounts.

What’s new: Employees now can elect to have their employer-contribution match go into their Roth 401(k), if the employer allows.

My take: This allows you to pay taxes up front, then take out contributions and earnings tax-free in the future.


Limits for deferred annuities are more attractive. A qualifying longevity annuity contract (QLAC) is a special kind of annuity typically purchased in an IRA that allows you to postpone the start of guaranteed lifelong payouts until you reach age 85. Under the old law, for 2022, you could invest up to $145,000 or 25% of your retirement account in a QLAC, whichever was less.

What’s new: Congress has made it easier to use QLACs. The new legislation repeals the 25% limit and raises the dollar amount up to $200,000, which will be adjusted for inflation each year.

My take: QLACs are even more attractive for retirees worried about running out of money in advanced old age. They also offer a tax-planning advantage—until you start receiving payouts from the QLAC, you can exclude them when calculating your RMDs, allowing your taxable distributions to be smaller.

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