The House recently passed the Family Savings Act of 2018, HR-6757, which would make changes to rules that apply to Individual Retirement Arrangements (IRAs) and introduce new savings vehicles. The bill is more in the form of minor tweaks to current rules than a major change to IRAs as they exist today but it includes similar provisions in another bill that was introduced earlier in the year in the Senate (The Retirement Enhancement Security Act) and appears to have some bipartisan support and a good chance of sticking around.

First, individuals would be allowed to contribute to a traditional IRA at any age. Currently, you are precluded from making contributions (either deductible or non-deductible) to a traditional IRA beginning in the year in which you reach the age of 70 ½. There is no such rule that applies to Roth IRAs. This would primarily benefit those who remain in the workforce (either full or part-time) longer than most of us.


Second, penalty-free early withdrawals would be allowed for birth or adoption. There would be a $7,500 limit to the penalty free amount.

Third, minimum distributions would not be required at age 70 ½ or older for those whose retirement account balances are $50,000 or less at the end of the year. The $50,000 amount would be adjusted annually for inflation.

Fourth, a Universal Savings Account would be created, where an individual could contribute up to $2,500 per year and would be similar to a Roth IRA. From my reading of the legislation, it appears that the contributions will not have to come from earned income and not be required for retirement purposes. The allowable contribution would be adjusted by inflation in increments of $100.

None of these proposed changes would apply to employer retirement plans like the Thrift Savings Plan, which is in the process of relaxing withdrawal rules. However, new tools you can use to help your future self would be welcomed.