Tax Overhaul Tweaks Some Rules for Retirement Accounts

Photo by Aaron Amat / Shutterstock.com

With all the confusion surrounding the recent tax overhaul, you might be wondering if any of the changes will impact how you save for retirement.

Rumors flew about the possibility of the tax code overhaul limiting tax-sheltered retirement saving when the legislation was working its way through Congress. But the final bill, signed into law last month, bears little if any bad news for savers.

The overhaul left the rules governing retirement accounts largely untouched, experts say. There are just a few minor changes you should understand.

What remains the same

The contribution limits and catch-up contribution limits for 401(k) and individual retirement account (IRA) plans were not altered by the overhaul, the Vanguard Group reports.

For example, for the 2018 tax year, the federal government will allow you to save as much money in such accounts as we reported prior to the overhaul’s passage in “Government Says You Can Stash Away More for Retirement in 2018.”

Federal income tax deductions for contributing to retirement accounts also remain in place, according to Vanguard and the H&R Block Tax Institute. These include deductions for money saved in:

What has changed

Most folks are unlikely to be affected by two retirement account changes in the overhaul. Still, it’s good to be aware of them.

Perhaps the biggest tweak is the repeal of Roth IRA recharacterizations.

Owners of traditional IRAs have the option to convert their accounts to Roth IRAs. In the past, they could also reverse that conversion, known as “recharacterizing.” But the tax code overhaul repealed the ability to recharacterize a Roth conversion.

So, starting with tax year 2018, if you convert a traditional IRA to a Roth IRA, you can no longer undo that change. In other words, you’re stuck with the Roth.

The nonprofit Tax Foundation reports this change is estimated to increase the federal government’s revenue by $500 million over a decade.

Another tweak applies only to folks living in 2016 presidentially declared disaster areas. A new special rule allows them to take up to $100,000 from retirement plans and IRAs and be exempt from the 10 percent early withdrawal tax, according to the Tax Foundation.

What’s your take on this news? Share your thoughts with us by commenting below or over on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
This Is the Best Used Car You Can Buy
This Is the Best Used Car You Can Buy

This car combines reliability, safety and long-lasting value.

Marooned at Home? Earn Some Cash Playing on Your Computer
Marooned at Home? Earn Some Cash Playing on Your Computer

Earn cash by reading emails, taking surveys, playing games, shopping and signing up for offers through this website.

10 Food Staples That Are Easy and Cheap to Make Yourself
10 Food Staples That Are Easy and Cheap to Make Yourself

Making any of these key foods yourself will improve meals — and your budget.

10 Colleges That Offer Free Tuition for Seniors
10 Colleges That Offer Free Tuition for Seniors

These schools let retirement-age students study, tuition-free, while earning college credit.

7 Things That Prove Cheaper Isn’t Always Better
7 Things That Prove Cheaper Isn’t Always Better

These items can end up costing you more if you try to go the cheap route.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

22 Things You Should Always Buy at a Dollar Store
22 Things You Should Always Buy at a Dollar Store

The dollar store has great bargains on these purchases.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You probably don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

8 Award-Winning Products That Impressed 40,000 Shoppers
8 Award-Winning Products That Impressed 40,000 Shoppers

The Product of the Year awards help shoppers find the best pet products, personal care items and everything in between.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.