Although passage of major federal legislation is unlikely during an election year, some smaller-scale proposals may be advanced. Recently, several proposals were introduced in Congress that could benefit investors saving for retirement and college.
Indeed, only a small percentage of proposed legislation is actually signed into law, but, for investors saving for the future, it’s worth following these bills to understand the current thinking of lawmakers as they consider issues like college savings and retirement.
For example, a proposal to add computer-related costs to the list of qualified expenses of 529 college savings plans was introduced several years ago (H.R. 529). But the bill didn’t become law until it was added to a broad budget package last fall.
Here’s a look some recent proposals in Congress:
Boost Saving for College Act
The Boost Saving for College Act would enhance 529 college savings accounts with the following provisions:
• Establishes a non-refundable tax credit up to $1,000 ($2,000 for couples) for those with income below $30,750 ($61,500 for couples)
• Allows an employer match (excluded from gross income) of up to $1,000 into a workplace 529 plan
• Provides that excess contributions to a 529 can be rolled over to the beneficiary’s Roth IRA after 10 years
• Permits the rollover of 529 funds to an ABLE account, which provides tax-advantaged savings for people with disabilities
Graduate Student Savings Act of 2016
Currently, stipends and fellowships for graduate students are considered income for tax purposes but do not count as compensation.
• The Graduate Student Savings Act would change the tax to allow these funds to be considered compensation in order to be contributed to an Individual Retirement Account if desired
Retirement Savings Lost and Found Act
Today, workers change jobs more often than previous years, leaving workplace retirement accounts behind in many cases.
The Retirement Savings Lost and Found Act would:
• Create a national database of abandoned retirement accounts that would help employees locate them
• Make it easier for plan sponsors to move small accounts to age-appropriate target-date funds
All of these proposals would offer incentives to savers planning for the future. In addition to monitoring legislative progress, a professional advisor may help you determine how to optimize the tax efficiency of your retirement or college savings plans within the existing tax laws.
For informational purposes only. Not an investment recommendation.
This information is not meant as tax or legal advice. Please consult with the appropriate tax or legal professional regarding your particular circumstances before making any investment decisions. Putnam does not provide tax or legal advice.